Nvidia will pay Softbank $40 billion to buy Arm in history-making deal

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Nvidia will pay Softbank $40 billion to buy Arm in history-making deal.
Image: Nvidia

Nvidia announced it would purchase Arm from Softbank Group Corp. for $40 billion on Sunday. The graphics hardware giant’s interest in the chip design firm first emerged in July, and news of an acquisition agreement broke on Saturday.

If allowed to proceed, the transaction will be the largest of its type in the semiconductor industry’s history.

Details on Nvidia’s acquisition of Arm

In a press release, Nvidia offered details on its multibillion-dollar deal with Softbank to buy Arm.

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The San Diego-based manufacturer is paying the Japanese conglomerate the $21.5 billion in stock and $12 billion in cash. However, the chipmaker is only putting up $2 billion to get the deal signed. Provided Arm hits certain performance goals, Nvidia will supply Softbank an additional $5 billion.

The corporation is also issuing its new subsidiary’s employees $1.5 billion equity. As far as welcoming gifts go, that beats branded pens or drink coasters.

After the sale is complete, Softbank will own a sub-10 percent stake in Nvidia.

New Boss, Same Priorities

The world’s leading graphics processor company stressed two ideas in its acquisition announcement.

One, Nvidia plans to enhance and expand its artificial intelligence (AI) offerings using Arm’s technology. And two, the firm does not intend to change the way the fabless semiconductor company does business. To that end, the graphics card maker plans to expand Arm’s footprint in Britain by building it an AI research and development center.

The new facility will be dedicated to producing AI-related advancements for the robotics, healthcare, and self-driving vehicle sectors. Though not mentioned directly, the complex will also likely be focused on crafting digital infrastructure improvement programs. In the fiscal second quarter of 2020, Nvidia’s data center products outsold its gaming offering for the first time.

However, Nvidia said it would not change Arm’s name or move its headquarters out of Cambridge, England. The chipmaker also declared it would allow its subsidiary to continue licensing its microelectronics architecture and instruction sets to other companies.

Possible Regulatory Hurdles Ahead

One difference between Nvidia and Softbank’s ownership of Arm will be the ease of acquisition process.

Bloomberg notes the conglomerate’s purchase with the chipmaker went smoothly because it did not own any competing businesses. However, Nvidia’s graphics processing unit (GPU) and data center businesses make it a rival to AMD and Intel, respectively.

While Nvidia pledged not to infringe on Arm’s neutrality, regulators might not be swayed by its assurances.

In addition, the company will need approvals from Chinese, British, European, and American officials to complete its $40 billion purchase. Because of those complexities, Nvidia does not expect its deal with Softbank to conclude until March 2022. However, mounting Sino-American trade tensions may nullify the agreement before then.

Qualcomm’s $44 billion bid to acquire NXP Semiconductors ultimately failed in 2018 because of the two superpower’s strained relationship.

With even more regulators involved in its record-setting purchase, Nvidia’s deal with Softbank could meet the same fate. However, if that happens, Arm’s status is still likely to change. Its current parent company previously expressed interest in taking it public if it could not find an acceptable buyer.

No matter how it resolves, the Nvidia-Arm-Softbank deal will have global implications for the semiconductor industry.

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