SoftBank buys ARM for £24 billion in Brexit Britain

UK chipmaker will retain its Cambridge HQ and double its staff in next five years

ARM

Japanese IT firm SoftBank is set to spend 24 billion on buying ARM, one of the UK's last tech giants.

The Cambridge-based chipmaker - which designs the chips used in virtually all smartphones - is one of the largest UK tech firms, and currently employs around 3,000 people.

ARM's chairman, Stuart Chambers, said: "It is the view of the board that this is a compelling offer for ARM shareholders, which secures the delivery of future value today and in cash. The board of ARM is reassured that ARM will remain a very significant UK business and will continue to play a key role in the development of new technology.

"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."

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"ARM will be an excellent strategic fit with the SoftBank group as we invest to capture the very significant opportunities provided by the internet of things," said SoftBank chairman and CEO Masayoshi Son.

"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."

The purchase gives SoftBank a major potential advantage in the IoT space, according to Forrester analyst Richard Fichera. "While it's not an acquisition that I even guessed was coming," he said, "it makes a certain kind of sense."

"Softbank is an active and forward-looking investor with a strong history of telecom/mobile-related investment, and ARM Holdings own the most widely deployed mobile processing architecture in the world; one that is used in the majority of mobile phones in the world. Additionally, ARM will almost certainly play a pivotal role in the emerging IoT and other embedded system applications."

"While they are paying a substantial premium to the current price, its a reasonable gamble to acquire one of the pivitol pieces of IP in the mobile and IoT space," Fichera added. 

News of the sale added 7.5 billion to ARM's market value this morning, as the company's sales surged by 45 per cent at the London Stock Exchange's opening.

However, some experts expressed sadness at one of the few remaining large UK tech firms falling to a foreign investor.

Analyst group TechMarketView's chairman, Richard Holway, said: "When everyone said So where is the UK's Google, Facebook or Apple?' we could all say But we have ARM!' I won't be able to say that anymore. I have often said that I believed that ARM was the best tech company the UK had ever produced."

He noted that Sage will be the only UK tech company left in the FTSE 100 once ARM is owned by SoftBank.

ARM confirmed that it will maintain its Cambridge headquarters, and also pledged to double the number of staff it employs over the coming five years, though it is not clear whether these will be UK citizens.

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Chambers said: "SoftBank has given assurances that it will invest considerably in the business, including doubling the UK headcount over the next five years and maintaining ARM's unique culture and business model."

RSM's David Blacher stated that the acquisition "follows the trend of successful UK tech businesses being snapped up by the big multinationals", and analysts have already blamed the after-effects of Brexit for the acquisition.

"An increase in inbound mergers and acquisitions was one of the obvious consequences of Brexit and weakened sterling," Edison Investment Research analyst Dan Ridsdale said. "But few expected it to manifest itself so quickly or at so large a scale."

However, the deal was likely in the works for some time before Brexit, and Ridsdale speculated that, with SoftBank paying 1,700p per share, it could be a while before the firm sees a profit on the acquisition.

"It could potentially look to offset this by nudging up royalty rates, but to do so could seriously imperil the company's largely benign status amongst the chip community it serves," the analyst said. "In the longer term, it is clear that SoftBank will need to very substantially expand earnings to generate a return. Whether it can do this, while continuing to dance delicately around the toes of its customers base will now be a question for the semiconductor industry and SoftBank to figure out."

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