Softbank Group agreed a deal to acquire ARM Holdings Plc (ADR)(NASDAQ:ARMH) for over $32 billion, causing shares of Sprint Communications Inc to drop by a massive 7% on Monday and by 10% on Tuesday.
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SoftBank aims to strengthen its internet of things (IoT) business with the acquisition of ARM, whose clients include major chip manufacturers around the world. Revenue grew 15 percent to $1.5 billion and pretax profit grew 24 percent to 512 million pounds.
ARM develops and licenses technology central to digital electronic devices, including those made for Apple and its fierce rival Samsung.
At a press conference in London on Monday, SoftBank Group President Masayoshi Son stressed that it will be common in the future for all types of goods, including automobiles and home electronics, to be connected to the internet.
Hermann Hauser, who is now a partner at Amadeus Capital, tweeted that ARM Holdings’ remarkable growth was the “proudest achievement of his life”. But few expected anyone that might be able to buy it, given the intricate antitrust problems that would rise.
“SoftBank has given assurances that it will invest considerably in the business, including maintaining ARM’s unique culture and business model”. This made companies based in the United Kingdom attractive targets for acquisitions by overseas companies, though new British Prime Minister Theresa May recently expressed caution over foreign takeovers of big companies in the country.
And while the British government could protest the capture of its biggest tech asset over the pound’s post-Brexit weakness, it is unlikely to stop it. Softbank is promising to increase United Kingdom employment after the deal is done.
ARM Holdings shareholders will also receive an interim dividend of 3.78p.
In a research report Thursday, Macquarie Securities said that “while the probability is low, one scenario could be (for SoftBank) to tender for the remaining 17% of Sprint”.
Following the resignation of SoftBank’s former deputy, Nikesh Arora, chief executive Masayoshi Son is leading the company’s investment strategy.
Other investors expressed concern that the ARM acquisition may delay SoftBank’s efforts to turn around unprofitable US wireless carrier Sprint Corp., which it bought in 2013.
Chancellor Philip Hammond reacts to this news by saying that this is not a loss for the United Kingdom, on the contrary, it shows that United Kingdom is still open for business with global investors: “Britain is open for business – and open to foreign investment”.
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He added: “The concern of brain drain and ARM business moving from the United Kingdom must be considered in this equation based on its know-how and leadership in chip design”.
