US semiconductor giant Nvidia has sealed an agreement with Japan’s Softbank group to purchase UK-based chipmaker Arm Holdings for $40 billion in cash, stock, and other future earnings.
Nvidia and Softbank Group Corp. jointly announced the mega-deal on Sunday (September 13) to acquire Arm Holdings Ltd. with the American firm taking a major stake in the world’s widely used semiconductor technology.
The agreement states that Nvidia will be paying $2 billion upon signing the deal. The company will also pay $21.5 billion in stock composed of over 40 million shares and $12 billion in cash for the U.K.-based chip designer.
The deal is considered as the biggest acquisition in the semiconductor industry history surpassing the acquisition of Arm by Softbank in 2016 which bought the company for $32 billion.
The investment giant Softbank, led by Japan’s richest man Masayoshi Son, will also rake in around $5 billion in cash and stocks through an earn-out agreement that is subject to the fulfillment of specific financial performance targets by Arm. Nvidia will also issue $1.5 billion in the form of equity to Arm employees.
According to Nvidia, the latest acquisition brings together the company’s leading AI computing platform with Arm’s vast ecosystem to create the premier computing company for the age of artificial intelligence, accelerating innovation while expanding into large, high-growth markets.
SoftBank will remain part of Arm’s long-term success as it takes in around 10 percent ownership stake in Nvidia.
“AI is the most powerful technology force of our time and has launched a new wave of computing,” said Jensen Huang, founder, and CEO of Nvidia.
“In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today’s internet-of-people. Our combination will create a company fabulously positioned for the age of AI,” Huang said.
Softbank, Nvidia shares up after mega-deal
Shares of SoftBank were up 9% in early Monday trading in Tokyo on news of the deal and renewed talks for the company going private.
Nvidia’s shares, meanwhile, gained 5.6% in premarket trading in the U.S. after the deal announcement.
While having lesser revenue compared to other chipmakers, Arm gains much of its profits from licensing chip fundamentals and selling processor designs.
A Bloomberg report said its technology is at the heart of the more than 1 billion smartphones sold annually. Chips that use Arms code and its layouts are in everything from factory equipment to home electronics.
Softbank Group Chairman and Chief Executive Officer Masayoshi Son said “Nvidia is the perfect partner for Arm.”
“Since acquiring Arm, we have honored our commitments and invested heavily in people, technology, and R&D, thereby expanding the business into new areas with high growth potential. Joining forces with a world leader in technology innovation creates new and exciting opportunities for Arm,” Chief Executive Son said.
“This is a compelling combination that projects Arm, Cambridge, and the U.K. 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. We look forward to supporting the continued success of the combined business,” the Japanese top executive said.
Arm CEO Simon Segars said together with Nvidia, they share a vision and passion that is ubiquitous with energy-efficient computing that will help address the world’s most pressing issues from climate change to healthcare, from agriculture to education.
“Delivering on this vision requires new approaches to hardware and software and a long-term commitment to research and development. By bringing together the technical strengths of our two companies we can accelerate our progress and create new solutions that will enable a global ecosystem of innovators. My management team and I are excited to be joining Nvidia so we can write this next chapter together,” Segars said in a statement.
Arm retains UK headquarters, to host AI facility
The Cambridge-based Arm Holdings will retain its present headquarters with Nvidia promising expansion and building of a world-class AI research facility that would support developments in healthcare, life sciences, robotics, self-driving cars, and other fields.
The facility will be designed to attract researchers and scientists from the U.K. and around the world to conduct groundbreaking work, according to Nvidia as they will build a state-of-the-art AI supercomputer, powered by Arm CPUs.
Huang said Simon Segars and his team at Arm have built an extraordinary company that is contributing to nearly every technology market in the world.
By uniting Nvidia’s AI computing capabilities with the vast ecosystem of Arm’s CPU, Huang said, they will be advancing cloud computing, smartphones, PCs, self-driving cars and robotics, and expand AI computing to every corner of the globe.
“This combination has tremendous benefits for both companies, our customers, and the industry. For Arm’s ecosystem, the combination will turbocharge Arm’s R&D capacity and expand its IP portfolio with Nvidia’s world-leading GPU and AI technology,” he added.
As part of Nvidia, Arm will also continue to operate its open-licensing model while maintaining the global customer neutrality that has been foundational to its success, with 180 billion chips shipped to-date by its licensees.
Arm partners will also benefit from both companies’ offerings, including Nvidia’s numerous innovations.
SoftBank and Arm are fully committed to satisfying the undertakings made by SoftBank when it acquired Arm in 2016, which are scheduled to be completed in September 2021.
Following the closing of the transaction, Nvidia intends to retain the name and strong brand identity of Arm and expand its base in Cambridge. Arm’s intellectual property will also remain registered in the U.K.
Nvidia will also build on Arm’s R&D presence in the U.K., establishing a new global center of excellence in AI research at Arm’s Cambridge campus.
The American chipmaker also pledged to invest in a state-of-the-art, Arm-powered AI supercomputer, and training facilities for developers and a startup incubator, which will attract world-class research talent and create a platform for innovation and industry partnerships in fields such as healthcare, robotics, and self-driving cars.
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