Japan’s SoftBank has ignored Brexit, but taken advantage of the slide in the value of the pound to launch an agreed 23.4 billion pound, or $A41 billion offer to acquire Britain’s key technology company, Arm Holdings, which makes chips for iPhones and other smartphones.
The deal was announced last night.
The bid for Arm, which is based in Cambridge will be the largest acquisition of a European technology business. SoftBank will pay £17 in cash for each share in ARM, a 43% premium to its closing price last Friday.
The shares jumped to 17.25 pounds in London last night, but eased to close at 16.93 pounds as investors realised there would not be a bidding war. Shares in Arm have hardly moved in the past year, so the premium offer will be welcomed by its shareholders.
The company is a major supplier of semi conductors to Apple and its shares have been hit by the growing market belief that iPhone sales have peaked.
While many in the markets worry about the impact on British business from the Brexit vote, Arm is seen as being insulated from any fallout by its leadership role in a key segment of the chip industry and the fact that it earns income in US dollars (which is boosted when converted into pounds).
The fall in the pound following the Brexit vote took sterling’s fall against the Japanese yen to more than 30% in the past year, which makes the deal much cheaper for Softbank than first seems.
Softbank is run and controlled by Masayoshi Son, who has turned the company into a global telecoms and media giant (with a market value of more than $US68 billion), though it is not as well known as the likes of Apple of Facebook.
It has a majority stake in Sprint, a major US teleco and mobile group, Yahoo Japan, which is the country’s most popular internet search engine. Softbank owns a $US65 billion stake in Chinese internet commerce giant, Alibaba (which cost just $US20 million) and Vodafone Japan, which was bought in 2006 for $US15 billion.
Sprint shares fell more than 6% overnight after investors realised the deal with Arm would mean no mop up offer from Softbank for a while. Even though it is losing money, Sprint shares had risen nearly 30% so far this year up to Friday on the basis Softbank would take out the shares it does not own.
According to the Dealogic, SoftBank has participated in more than 140 deals worth about $US82 billion in japan, the US, Europe, China and Asia – from a Chinese competitor to Uber, to Supercell, the rapidly growing Finish games company. That has just been sold to Tencent Holdings of China, with Softbank getting $US7 billion. It also sold some of its Alibaba shares for $US10 billion.
In a statement last night, Stuart Chambers, chairman of Arm, said:
"SoftBank has given assurances that it will invest considerably in the business, including maintaining ARM’s unique culture and business model. ARM is an outstanding company with an exceptional track record of growth. The Board believes that by accessing all the resources that SoftBank has to offer, ARM will be able to further accelerate the use of ARM-based technology wherever computing happens. And Masayoshi Son, chairman and chief executive of SoftBank said 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. ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the “Internet of Things”.
"This investment also marks our strong commitment to the UK and the competitive advantage provided by the deep pool of science and technology talent in Cambridge. As an integral part of the transaction, we intend to at least double the number of employees employed by ARM (it employs around 4,000 people) in the UK over the next five years.
“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."
