In what is no surprise to many industry watchers, the deal that would have seen Nvidia purchasing Arm has collapsed.
The parent company, Softbank, has revealed that Nvidia will no longer be purchasing Arm for $40 billion. The Japanese investment company cited significant regulatory challenges as the reason.
However, Arm will get to keep the $1.25 deposit paid by Nvidia and account for it as profit in its report for this quarter.
The two companies announced the proposed sale in September 2020 and was going to be the biggest ever in the industry. It would have granted Nvidia total control of a company whose tech and IP are crucial to a vast swathe of the global industry, including Nvidia’s competitors. Arm’s tech finds its way into billions of products each year, including smartphones, servers, tablets, laptops, desktops, and even cars.
Many of Nvidia’s competitors, including Google and Microsoft, have kicked against the deal, arguing that Arm should remain a neutral party. This is because many Nvidia competitors, by necessity, have to expose their trade secret to Arm, and a sale would let Nvidia access them. Nvidia tried to assure everyone that Arm would continue to function independently, but the assurance did nothing to assuage fears of potential abuse of monopoly position.
Anti-monopoly watchdogs had also got involved, with China expected to oppose the purchase vigorously. Nvidia CEO Jensen Huang had to publicly defend the deal, admitting that it would take far longer for it to be concluded due to the amount of opposition it generated.
Reports surfaced weeks ago that the deal was not going ahead, and the two parties are moving on separately after regulators from the UK, US, and EU opened investigations.
Meanwhile, Arm will still raise money through an IPO, as revealed by SoftBank. This would start in April this year.
Also, Arm CEO Simon Segars has decided to step down from his role, as he doesn’t wish to be involved in the effort to become a publicly-traded company. He will be replaced by Arms’ current head of IP, Rene Haas, who used to work at Nvidia.
Here is Arm’s press release addressing the failed transaction, in part:
“As announced in “Sale of All Shares in Subsidiary Arm Limited” dated September 14, 2020, SoftBank Group Capital Limited, a wholly-owned subsidiary (“SBGC”), and SoftBank Vision Fund 1 (“SVF1”) entered into a definitive agreement (the “Agreement”) with NVIDIA Corporation (“NVIDIA”), a U.S.-based semiconductor manufacturer, on September 13, 2020 (US time), whereby SoftBank Group Corp. (“SBG”) would sell all of its shares in wholly-owned subsidiary Arm Limited (“Arm”) held by SBGC and SVF1 to NVIDIA (the “Transaction”). However, NVIDIA and SBG have agreed to terminate the Agreement on February 8, 2022 because of significant regulatory challenges preventing the consummation of the Transaction, despite good faith efforts by the parties.
”In accordance with the terms of the Agreement, the deposit of USD 1.25 billion*1 (JPY 143.8 billion*2) received by SBGC at the time of signing is non-refundable and therefore such amount will be recognized as profit in the fourth quarter of the fiscal year ending March 31, 2022.”