Nvidia’s $40bn Purchase Of ARM Holdings Collapses

GPU powerhouse Nvidia has confirmed that the regulatory hurdles facing its controversial acquisition of UK chip designer ARM Holdings are too great to overcome.

ARM owner Softbank and Nvidia confirmed “the termination of the previously announced transaction,” and blamed the “significant regulatory challenges” facing the deal.

The cancellation will be viewed with relief within the tech industry, as well as by multiple governments and regulatory watchdogs, all of whom were universally opposed Nvidia acquiring the British chip designer.

Regulatory hurdles

It was back in September 2020, after months of rumours, when it was confirmed that ARM was to be sold to Nvidia for a hefty $40 billion (£31.2bn).

But the acquisition immediately encountered vigorous opposition, and the deal soon faced regulatory investigations in the UK, US, and Europe.

The most pressing investigation was the UK probe, as ARM is a British firm. In November the UK government ordered a full Phase two investigation of the deal, amid strong signs the British government could block the deal on national security grounds.

Prior to that in October the European Commission opened its long-touted probe, despite Nvidia offering it some undisclosed concessions.

Then in December the Federal Trade Commission (FTC) announced it was suing Nvidia to stop its acquisition of ARM.

These combined regulatory probes was because the British chip designer is hugely important technology player.

ARM designs power 95 percent of the world’s smartphones, and there was concern at ARM’s sale to a single chip supplier could give Nvidia too much leverage in the market.

There was also concern the acquisition would harm competition by giving Nvidia access to the competitively sensitive information of ARM’s licensees, some of whom are Nvidia’s rivals, and that it was likely to decrease the incentive for ARM to pursue innovations that are perceived to conflict with Nvidia’s business interests.

Nvidia repeated said it would not do this, but last month reports surfaced that Nvidia was preparing abandon its purchase of ARM.

Deal collapse

And now Japan’s SoftBank, (which had acquired ARM for $32bn in 2016), and Nvidia confirmed that the transaction has been called off.

ARM will instead pursue an initial public offering (IPO) before the end of March 2023.

“Nvidia and and SoftBank Group today announced the termination of the previously announced transaction whereby Nvidia would acquire ARM from SBG,” the two firms stated. “The parties agreed to terminate the Agreement because of significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties. ARM will now start preparations for a public offering.”

“ARM has a bright future, and we’ll continue to support them as a proud licensee for decades to come,” said Jensen Huang, founder and CEO of Nvidia. “ARM is at the centre of the important dynamics in computing.”

“Though we won’t be one company, we will partner closely with ARM,” Huang added. “The significant investments that Masa has made have positioned ARM to expand the reach of the ARM CPU beyond client computing to supercomputing, cloud, AI and robotics. I expect ARM to be the most important CPU architecture of the next decade.”

“ARM is becoming a centre of innovation not only in the mobile phone revolution, but also in cloud computing, automotive, the Internet of Things and the metaverse, and has entered its second growth phase,” said Masayoshi Son, chairman & CEO of SoftBank Group. “We will take this opportunity and start preparing to take ARM public, and to make even further progress.”

“I want to thank Jensen and his talented team at Nvidia for trying to bring together these two great companies and wish them all the success,” said Son.

Under the deal cancellation terms, Softbank will retain the $1.25 billion prepaid by Nvidia, which will be recorded as profit in the fourth quarter, and Nvidia will retain its 20-year Arm license.

New CEO

The cancellation of the acquisition has also seen an abrupt change of management at ARM.

In July last year ARM’s former CEO, Simon Segars, had strongly defended the Nvidia purchase, and said it was the best outcome for the British chip designer, and was a better solution than an IPO.

But now ARM has announced that “its board of directors has appointed 35-year semiconductor industry leader Rene Haas as chief executive officer and member of the board of directors, effective immediately.”

Simon Segars has stepped down as chief executive officer and member of the board of directors after 30 years with the company. In the near-term, Segars will support the leadership transition in an advisory role for ARM.

“Rene is the right leader to accelerate Arm’s growth as the company starts making preparations to re-enter the public markets,” said Masayoshi Son of SoftBank. “I would like to thank Simon for his leadership, contributions and dedication to Arm over the past 30 years.”

“It is an honour to lead the world’s most influential technology company at a time when ARM’s market opportunity has never been greater,” said Haas. “As the innovators of the industry’s most pervasive compute architecture, ARM changed lives around the globe by delivering the technology at the heart of the smartphone revolution.”

“We are now uniquely positioned to address the diverse demands of AI, cloud, IoT, automotive and the Metaverse,” said Haas. “And with the uncertainty of the past several months behind us, we are emboldened by a renewed energy to move into a growth strategy and change lives around the world – again.”

“ARM has defined my working life, and I am very thankful for being given the opportunity to grow from graduate engineer to CEO,” noted the exiting Segars (below). “I’m very bullish on ARM’s future success under Rene’s leadership and can’t think of any anyone better to lead the company through its next chapter.”

Haas served as president of the ARM IP Products Group (IPG) since 2017.

Prior to joining ARM in 2013, Haas held several applications management, applications engineering and product engineering roles, including seven years at Nvidia as vice president and general manager of its computing products business.