Softbank sells chip designer Arm to Nvidia for $40bn

Japan’s SoftBank said it had agreed to sell Arm Holdings to Nvidia for $40bn, just four years after buying the chipmaker.

SoftBank will become Nvidia’s largest shareholder after the Japanese group receives $21.5bn in common stock and $12bn in cash. Arm licenses its technology to customers like Qualcomm, Apple and Samsung. The deal is subject to regulatory approval in various countries and expected to complete in around 18 months.

Analysts said political sensitivities could see strong scrutiny from the UK government. When Softbank bought Arm in 2016, Theresa May's government insisted on guarantees which would retain its Cambridge site as headquarters.

The deal will see SoftBank and its $100bn Vision Fund, which owns 25% of Arm, take a stake in Nvidia of 6.7% - 8.1%.

Nvidia said it would license its graphical processor unit through Arm’s network of silicon partners and also make its technology available to others.

Arm is the latest large asset disposal by SoftBank founder Masayoshi Son as he explores future options, including taking the group private.

Nvidia said it expected the deal to be immediately accretive for underlying gross margin and underlying earnings per share.

Hargreaves Lansdown analyst Nicholas Hyett said that while Nvidia is best known for its gaming graphics chips and Arm for its smartphone chips, this deal was being predicated on Artificial Intelligence – "an area where Nvidia has expertise but which is really in its infancy".

"By drawing on Arm’s huge pool of active devices, as well as its technical knowhow, Nvidia’s hoping it can crack a technology with potential applications in cloud, smartphones, PCs, self-driving cars, robotics and the Internet of Things."

"It’s a big and uncertain bet, and comes at a high price. Fortunately the two groups have core businesses which are very cash generative, and together they should be able to quickly pay down any financial hangover from the deal."

"However, the agreement isn’t cast iron yet. Prior to its 2016 acquisition by Softbank, Arm was seen as one of the UK’s technological jewels, and approving its sale to an overseas buyer was politically sensitive."

"That’s probably more the case now than ever – and with Softbank’s official commitments to Arm’s Cambridge site due to expire in 2021 the deal may well come with additional strings attached from the UK government.”