SoftBank buys British chip designer ARM for $32bn

Japanese mobile giant SoftBank on Monday snapped up iPhone chip designer ARM Holdings for £24.3 billion, the pair announced in a major boost for post-Brexit Britain.

Conservative Prime Minister Theresa May declared that the record Asian investment proved "Britain is open for business", just three weeks after Britons voted to leave the European Union.

The all-cash deal, worth the equivalent of $32 billion or 29 billion euros, was unanimously backed by ARM management, the two companies revealed in a statement.
"We have long admired ARM as a world renowned and highly respected technology company that is by some distance the market-leader in its field," said SoftBank chairman and chief executive Masayoshi Son.

"This is one of the most important acquisitions we have ever made, and I expect ARM to be a key pillar of SoftBank's growth strategy going forward."

May had given her backing on Sunday after talking with Son, whose company has vowed to double ARM's British workforce and keep its headquarters in the university city of Cambridge.

"I have spoken to SoftBank directly. They have confirmed their commitment to keep the company in Cambridge and to invest further to double the number of UK jobs over five years," May told lawmakers in the House of Commons.

"This £24-billion investment will be the largest ever Asian investment in the UK. It is a clear demonstration that Britain is open for business, as attractive to international investment as ever."

Prior to becoming prime minister, May had pledged a "proper industrial strategy" for closer scrutiny of foreign takeovers of British firms.

Son added on Monday that the deal marked SoftBank's "strong commitment to the UK and the competitive advantage provided by the deep pool of science and technology talent" in Cambridge.

British finance minister Philip Hammond praised the mega deal that comes amid warnings about a slowdown to growth in the country after its June 23 vote to exit the EU bloc.

"Just three weeks after the referendum decision, it shows that Britain has lost none of its allure to international investors."

- Weak pound -

Analysts said the vast weakening of the pound, in particular against the dollar, since the referendum result is making British companies attractive for foreign groups.

"We can see in this deal the effect of Brexit and the collapse in the pound as British companies become ripe takeover targets," said Neil Wilson, analyst at ETX Capital trading group.

"A lot more British firms could become foreign-owned quite soon," he added.

SoftBank meanwhile said it would offer £17 for each ARM share, a premium of around 43 percent compared with Friday's closing price of £11.89.

That sent ARM's share price rocketing by about 41 percent on Monday.

ARM develops and licenses technology central to digital electronic devices, including those made for Apple and its fierce rival Samsung.

The British company's customers shipped "about 15 billion ARM-based chips" in 2015, up almost a quarter year-on-year, according to the group's website. Almost half of the chips were used for mobile phones and tablets, it added.

ARM's revenues meanwhile jumped 15 percent to almost $1.5 billion last year on the design of chips used also in computer servers.

- Counterbid threat -

City Index analyst Ken Odeluga warned that the "main risk" to the SoftBank deal was a "potential counterbid" from a big chip-sector player like Intel or Samsung.

"Intel might be motivated to make a counter offer by its notable failure to penetrate deeply into the mobile components space," Odeluga said.

"Samsung might spy an opportunity to synergise and expand its own chip manufacturing business.

"Both would, like SoftBank, be mindful of how rare the current steep discount on British companies will turn out to be, following the pound's (recent) fall to 30-year lows" in the wake of the shock Brexit decision.

Source: AFP