Nvidia acquires UK chip designer Arm from SoftBank in $40b deal

Nvidia has announced it will acquire UK-based chip designer Arm Holdings from SoftBank in a US$40 billion deal to be met through a combination of shares and cash.

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Under the terms of the deal, Nvidia will pay a total of US$21.5 billion to SoftBank in Nvidia common stock and US$12 billion in cash, including US$2 billion payable at signing. The Japanese conglomerate may receive up to US$5 billion in cash or common stock as well under an earn-out construct, subject to specific financial performance metrics for Arm.

Nvidia, which specializes in graphics processing unit design and manufacturing, will also issue US$1.5 billion in equity to Arm employees.

The transaction, which has been approved by the boards of all companies involved, is expected to be completed in roughly 18 months.

“This is a compelling combination that projects Arm, Cambridge, and the UK to the forefront of some of the most exciting technological innovations of our time and is why SoftBank is excited to invest in Arm’s long-term success as a major shareholder in Nvidia,” said SoftBank chairman and CEO Masayoshi Son in a statement.

Arm is a semiconductor company that’s primarily focused on processor design. It’s best known for manufacturing CPUs used in mobile phones, tablets, and other smart devices. SoftBank acquired the Cambridge-headquartered company in 2016 for about US$31.4 billion in cash.

Arm will continue to operate its open-licensing model while benefiting from Nvidia’s in-house tech, according to the statement. Nvidia also said it will build on Arm’s R&D presence in the UK, establishing a new global center of excellence in AI research in the country.

According to the Financial Times, SoftBank executives have reportedly resumed discussions of possibly taking the company private using proceeds from the Arm deal and other cash on hand. The talks were spurred by dissatisfaction over the consistent discount in the SoftBank’s US$115 billion equity valuation despite the value of its individual holdings.