UPDATED 21:37 EST / FEBRUARY 07 2022


Nvidia’s $66B acquisition of Arm called off on regulatory concerns


Nvidia Corp.’s $66 billion deal to acquire Arm Ltd. has been called off, nixed by regulatory concerns.

The companies, along with Arm owner SoftBank Group Corp., announced the collapse of the deal late Monday night. Arm said it will now prepare for an initial public offering instead within the fiscal year ending in March 2023.

In addition, Arm Chief Executive Simon Segars is leaving, replaced by Rene Haas, president of Arm’s intellectual property group and a onetime Nvidia vice president and general manager of its computing products business.

“Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come,” Jensen Huang, founder and CEO of Nvidia, said in a statement. “Though we won’t be one company, we will partner closely with Arm. I expect Arm to be the most important CPU architecture of the next decade.”

The Financial Times, referring to three people with direct knowledge of the transaction, had reported late Monday that the deal had collapsed after regulators in the U.S., the U.K. and the European Union raised serious concerns about its effects on competition in the semiconductor industry.

The regulatory concerns had weighed on the deal for months. The U.K.’s top antitrust regulator, the Competition and Markets Authority, was first out of the gate, launching an investigation into the deal in August. The CMA’s investigation looked to scrutinize the proposed transaction more closely because it believed that Nvidia’s acquisition of Arm could harm competition in the chip market. Specifically, the regulator was concerned that Nvidia may have an incentive to restrict competitors’ access to Arm chip blueprints.

Arm indicated it would take steps to prevent potentially anticompetitive behavior following the deal to address those concerns. Arm proposed that it would “keep the firewalls up between the two companies relative to confidentiality” and committed not to give Nvidia earlier access than competitors to new technology. Nvidia, in turn, stated that Arm would continue to operate its current open licensing model.

The U.S. Federal Trade Commission filed a lawsuit in December to block the deal. The FTC sued Nvidia directly on antitrust grounds, claiming that “the proposed vertical deal would give one of the largest chip companies control over the computing technology and designs that rival firms rely on to develop their own competing chips.”

Reports that the deal was in trouble first surfaced Jan. 25. It was claimed that Nvidia was quietly preparing to abandon the transaction because of a failure to secure necessary regulatory approvals.

Under previously outlined terms of the deal, SoftBank will retain the $1.25 billion prepaid by Nvidia as a breakup fee, which SoftBank will count as profit in the fourth quarter. Nvidia will retain its 20-year Arm license.

When first reported in September, the deal valued Arm at about $40 billion. That transaction was meant to be $21.5 billion in stock and $12 billion in cash upfront for Arm, including a $2 billion payment at signing. An additional $5 billion was on the table in earn-outs if Arm’s performance met certain targets, while $1.5 billion more would be paid to Arm employees in Nvidia stock.

Nvidia’s share price then boomed and the deal, based on the offer on Nvidia’s shares, valued Arm at $87 billion in November. Based on Nvidia’s current share price, the deal is valued at around $66 billion.

Given the previous report in late January that the deal was in trouble, Nvidia investors didn’t seem fussed by the news that the acquisition is reportedly off. Nvidia’s shares rose 1.7% in regular trading, closing at $247.28.

With reporting from Robert Hof

Image: Nvidia

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