UK-based semiconductor technology producer Arm would look to have an initial public offering (IPO) if its acquisition by fellow chipmaker Nvidia were to fall through, a source told Global Corporate Venturing.
As Nvidia’s takeover of Arm is being challenged by US authorities and looking increasingly unlikely to close, a potential IPO is being mooted as a backup option that would bring Arm back to public markets after it was taken private by internet and telecommunications conglomerate SoftBank for $31.4bn in 2016.
Announced in September this year, the acquisition would see Nvidia buy Arm from SoftBank and its Vision Fund in a deal worth $40bn through a combination of cash and Nvidia shares, with SoftBank ending up with a sub-10% equity stake in Nvidia. With Nvidia’s share price rise since the announcement, the deal to buy Arm could be worth more than $70bn.
This deal, however, now looks to be in jeopardy as the US Federal Trade Commission (FTC) took legal action last week to block it, saying that it would put Nvidia in too powerful a position in the global chip market. Nvidia said it would move forward with the deal, but prospects remain dim as it would face similar hurdles in the European and Chinese markets even if it beat the odds in the US.
Arm, which licenses chip technology for devices ranging from automobiles to smartphones and factory equipment, is seen by authorities as best staying a neutral party not owned by any single chipmaker, and assurances of a Chinese wall between it and Nvidia’s own operations may not be enough to assuage the FTC’s stance.
As per the deal, $21.5bn would be paid in Nvidia common stock, with $12bn in cash including a $2bn upfront payment. Another $5bn were included as contingent payments based on certain financial milestones.
While SoftBank still benefits from the $2bn it received upfront, the loss of the deal would represent a significant blow and it remains to be seen if the valuation at IPO will be as high as what Nvidia has offered, a prospect analysts are not optimistic about.
For Nvidia, whose stock has gone up by as high as 50% since the deal was announced – before dipping following the FTC’s announcement – the failure to close Arm is not necessarily set to have a massive impact, as there had been question marks about the deal’s regulatory viability since from the outset and the stock’s momentum seems to be steady.
Arm has in the past made strategic venture investments, taking part in a February 2019 funding round for flexible electronics producer PragmatIC, raising over $16.7m alongside packaging materials producer Avery Dennison and undisclosed other investors. Cambridge Innovation Capital, a patient capital fund linked to University of Cambridge, had led the round.
Other strategic venture investments the company has made since being taken over by SoftBank include those into computing and processor technology developers such as server processor producer Ampere Computing, genomic analysis tool developer Centrillion Technologies Taiwan and semiconductor developer Blu Wireless, among others.
