SoftBank arranges to buy ARM for $31b
In this article (5)
SoftBank has entered a deal to buy chipmaker ARM for a whopping $31 billion to help cement the company’s future in the burgeoning IoT sector.
The boards of both SoftBank and ARM have unanimously recommended the proposed deal to buy out 100% of ARM and turn the company into a wholly-owned SoftBank subsidiary.
The proposed buyout of UK-based ARM is the third largest proposed corporate merger of the year, and the first major deal in the UK since the Brexit vote, which has pushed down the value of the British pound to make the prospect more enticing for SoftBank.
ARM’s core business of designing chips for mobile devices alone does not justify the high purchase price, which is more than 70 times the company’s net earnings for 2015. The company generated a mere $1.5 billion in revenue last year.
But to counter slowing smartphone sales, ARM has been seeking to diversify into other sectors by designing chips for IoT devices, and this is where SoftBank’s interest in the company lies.
Speaking at a press conference announcing the proposed merger, SoftBank CEO Masayoshi Son said the IoT is expected to be the “biggest paradigm shift in human history,” and that the investment marks a move to enter at the ground floor of this shift.
Presentation materials prepared for the deal indicate that 14.8 billion ARM-powered SoCs shipped in 2015. The company is particularly targeting the consumer electronics, enterprise infrastructure, automotive and embedded intelligence segments.
The deal still requires approval from ARM shareholders and English courts, but subject to these approvals is expected to close in the current calendar quarter.
Questions & Answers
Q.What is the primary reason SoftBank is buying ARM?
What is the primary reason SoftBank is buying ARM?
SoftBank's interest in ARM is driven by the chipmaker's diversification into designing chips for Internet of Things (IoT) devices. SoftBank sees the IoT sector as a significant future market opportunity.
Q.Does ARM's current business performance justify the acquisition price?
Does ARM's current business performance justify the acquisition price?
No, the article states that ARM's core mobile device chip business alone does not justify the high purchase price. The acquisition price is more than 70 times the company’s net earnings for 2015.
Q.What effect did the recent Brexit vote have on this deal?
What effect did the recent Brexit vote have on this deal?
The Brexit vote has pushed down the value of the British pound. This devaluation of the currency made the prospect of buying UK-based ARM more enticing for SoftBank.
Q.Which approvals are still needed for the deal to conclude?
Which approvals are still needed for the deal to conclude?
The proposed deal still requires approval from ARM shareholders and English courts. Subject to these necessary approvals, the acquisition is expected to close in the current calendar quarter.
Reader pulse
SoftBank's ARM acquisition: Smart move or too risky?
19,680 votes so far