Japanese technology company SoftBank Group Corp. is buying Britain’s ARM Holdings for 24.3 billion pounds ($40.2 billion), in a deal the British government hailed Monday as a vote of confidence in the country following last month’s vote to leave the European Union.
The recommended cash deal underlines the desire of SoftBank, which also owns U.S. telecommunications company Sprint, to expand in the so-called “Internet of Things,” which refers to how a multitude of home devices from smart-thermostats to security cameras and domestic appliances can connect online and work in sync.
ARM, which is the biggest-listed technology company in Britain, has a world-renowned reputation as an innovator in the “Internet of Things” — its technology is used in most smartphones, for example.
“ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the ‘Internet of Things’,” said Masayoshi Son, Chairman and CEO of SoftBank.
ARM centers its business on intellectual property, especially in mobile computing, rather than chip manufacturing, for which it relies on partners. Its technology is used in 95 per cent of smartphones and 80 per cent of digital cameras, according to the company. Augmented-reality headsets, biometric sensors, self-driving cars, commercial drones and smart watches all use ARM technology.
Softbank plans to double U.K. hires
SoftBank said it intends “to at least double” the number of employees employed by ARM in the U.K. over the next five years. Cambridge-based ARM, which was founded in 1990, employs a little more than 4,000 people worldwide. Around 1,600 of those are employed in Britain.
Philip Hammond, Britain’s new Treasury chief, said the deal shows that Britain has “lost none of its allure to international investors” in the wake of the June 23 vote to leave the European Union.
“Britain is open for business — and open to foreign investment,” Hammond said.
The vote for so-called Brexit has raised fears that the British economy will suffer. A raft of evidence already shows consumer and business sentiment has taken a hit since the vote, prompting some economists to warn that the country is heading for recession.
“The transaction represents the first major acquisition following the referendum and whilst the purchase doesn’t constitute a resounding vote of confidence in the post-EU UK, it does illustrate that the after-effects of the Brexit have not deterred all parties from continuing with business as usual,” said David Cheetham, market analyst at XTB.
One major impact of the referendum result has been a big fall in the value of the British pound but SoftBank’s Son said his company wasn’t buying ARM on the cheap given that its share price had actually risen since the vote, offsetting any impact from the currency’s fall.
Shareholder, court approval needed
The deal, which SoftBank said it hopes to complete by the end of September, has a few steps pending. ARM shareholders, who have been advised by the board to accept the offer, and the English courts still need to give their backing.
“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,” ARM Chairman Stuart Chambers said.
Investors think it’s likely to go through. ARM’s share price was up 42.5 per cent at 16.94 pounds, just below the offer price of 17 pounds a share. SoftBank’s offer represents a 43 per cent premium to ARM’s closing share price on Friday.
SoftBank, a mobile carrier in Japan, also runs a solar-based utility and a humanoid robot business. It has struggled trying to turn around Sprint, although Son says there is progress on that.
The ARM purchase is the first major announcement from SoftBank after Nikesh Arora, who had joined from Google in 2014, said last month he was stepping down as Softbank president. Son has always been the chief engineer of SoftBank, and was behind Arora’s appointment, but he has repeatedly said he is trying to groom the next head of the company.