Worth $40 billion and taking up to 16 months, the global chip industry's century of mergers and acquisitions ultimately failed.
On September 14, 2020, Nvidia announced that it has reached an agreement with ARM's current owner, SoftBank, to acquire ARM in the form of cash and shares, corresponding to a corresponding value of about $40 billion, and the original planned acquisition will be completed within 18 months. If the deal is successfully completed, it will be the largest deal in the history of the semiconductor industry.
But this is just a dream between NVIDIA and SoftBank, which is run by Son Zhengyi.
According to the first financial report, on February 8, a number of media reported that the above transaction has failed, SoftBank plans to let ARM be listed in the fiscal year ending in March 2023, and the IPO size is expected to reach $80 billion. SoftBank's net sales in the first three quarters were 4.58 trillion yen, and net profit in the third quarter was 29.05 billion yen.
According to the Financial Times, citing people familiar with the matter, if the deal is not closed, then SoftBank will receive a break-up fee of up to $1.25 billion (about 7.95 billion yuan).
The $40 billion deal collapsed
Nvidia's acquisition of ARM failed
The reason for the failure was that U.S., U.K. and EU regulators expressed serious concerns about the deal's impact on competition in the global semiconductor industry.
In September 2020, Nvidia agreed to acquire ARM from SoftBank for about $40 billion, which is expected to be the largest merger in the chip industry. If the deal is successful, it will give NVIDIA control of a company that controls the core of most of the world's mobile devices. Large tech companies that rely on Arm chip designs, including Qualcomm and Microsoft, have opposed the acquisition.
Image source: NVIDIA official website
It was previously agreed that Nvidia would pay a total of $21.5 billion in stock and $12 billion in cash to SoftBank. Upon completion of the transaction, SoftBank expects to retain less than 10 percent of ARM's shares. However, due to the rise in Nvidia's stock price, the failure of the transaction cost SoftBank the huge windfall that it should have received. As Nvidia's stock price soared, it peaked at $87 billion at one point last November. However, NVIDIA's stock price has been falling since then.
It is reported that due to the failure of the acquisition transaction, SoftBank will receive up to $1.25 billion in deal rupture "break-up fees" and seek to split ARM through an initial public offering by the end of this year.
The failure will lead to a drastic change in Arm's management, with CEO Simon Segars to be replaced by Rene Haas, head of the company's intellectual property division, people familiar with the matter said.
An Nvidia spokesperson responded to questions about the deal last month, saying in a joint "letter" with Arm to the UK's Competition and Markets Authority (CMA) that the acquisition "provides an opportunity to accelerate Arm and promote competition and innovation".
Nvidia also said that going to market Arm is not a good option. "Some market participants have suggested that SoftBank list Arm, though the IPO will force Arm to narrow the areas it focuses on and reduce investment in new technologies," the company said. ”
Nvidia said people were exaggerating Arm's market power. The company said Arm's financial situation is not optimistic and needs more financial support. The documents from both companies read: "Some idealistically believe that Arm will be popular after an IPO in the UK and therefore can drive high valuations in the market. But the open market is not emotional, and the capital market needs profitability and performance. ”
Market participants believe that even if the acquisition of Arm fails, it will not adversely affect NVIDIA. The company's stock price has risen 82 percent over the past year. Nvidia will announce its latest quarterly earnings report on February 16. U.S. stocks closed on Monday with NVIDIA shares up 1.68 percent at $247.26.
Nvidia founder CEO Jen-Hsun Huang admitted in a conversation with Simon Sigas last year: "The tide of computing change is reshaping the technology market landscape. NVIDIA itself is also very good, not necessarily to acquire Arm, we do this because we want to make computers more powerful, Arm independence does not mean strong, no one needs fragile independence. ”
Kevin Krewell, an analyst at Tirias Research, told reporters: "The challenge for Nvidia will be how to guide Arm to find the right balance between achieving the common goals of NVIDIA and Arm, and on the premise that this approach does not damage the latter's position in the market as an independent IP provider." ”
Separately, Alibaba shares closed down nearly 6.1 percent in the U.S. market on Monday after Citi analysts believed Alibaba's registration of more American Depositary Shares (ADS) suggested SoftBank may intend to reduce some of its stake.
Strong and powerful join forces but there is a lot of resistance
Nvidia is the absolute leader in GPU (standalone graphics processing unit) and AI chips, while ARM is only a medium-sized chip design company, but has the cornerstone technology that the entire industry relies on, Arm architecture processors with low power consumption as an advantage, in almost all mobile devices around the world (mobile phones, tablets, IoT devices, etc.) widely used, is expanding to automotive, data center services and other device processors. Arm itself does not sell semiconductors, but only provides chip design solutions and charges licensing fees and patent fees. Whether it is Apple or Qualcomm, or Samsung, MediaTek and Huawei, they are inseparable from ARM's chip design for the time being.
Many of Nvidia's businesses are in direct or indirect competition with existing Arm customers such as Samsung, Apple, Qualcomm, and Intel, and a number of tech giants have become "roadblocks", and they are worried that Nvidia will restrict their use of Arm's chip designs, giving NVIDIA an unfair advantage in the large chip market such as data centers and automobiles. According to incomplete statistics, industry giants such as Intel, Qualcomm, Microsoft, Google, Samsung, Amazon and Tesla are all clear opponents. Because the acquisition needs to be reviewed by regulators from the United Kingdom, the United States, the European Union, and China, Qualcomm, Apple and other companies have raised objections to the relevant departments in their own countries.
Although Nvidia has repeatedly stated that the transaction will benefit ARM itself and the chip industry, NVIDIA head Jen-Hsun Huang also stressed that as part of the company, ARM will continue to operate its open licensing model while maintaining global customer neutrality, allowing ARM headquarters to remain in Cambridge, UK.
But Mr. Huang apparently underestimated the difficulty of the antitrust review of the merger.
In August 2021, the UK Competition and Markets Authority said that the acquisition may disrupt the competitive landscape of the chip industry, affect the national security of the UNITED Kingdom, and consider blocking the acquisition; in October 2021, the EU antitrust regulator issued a warning that the acquisition risked pushing up the global chip price; in December 2021, the US Federal Trade Commission (FTC) formally sued Nvidia to veto Nvidia's acquisition of ARM.
Under multiple pressures, there were rumors of the failure of the acquisition at the end of last year. However, in recent years, due to the strong demand for NVIDIA GPUs and data center AI chips, the company's performance and stock price have soared, even if the acquisition fails, Nvidia may not be greatly affected.
(Disclaimer: The content and data of the article are for informational purposes only and do not constitute investment advice.) Investors operate accordingly at their own risk. ）
Edited | Cheng Peng du Hengfeng
Proofreading | Lu Xiangyong
Cover image source: Visual China
Daily economic news is synthesized from China Fund News, Financial Associated Press, First Financial News, and market information
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