agreed to call off Nvidia’s deal to buy microprocessor design house Arm.
The deal’s collapse doesn’t come as a surprise.
“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,” Nvidia (ticker: NVDA) and SoftBank (JP:9984) said in a joint statement.
The Federal Trade Commission sued to block Nvidia’s acquisition of Arm back in December, citing competition concerns. After the FTC sued to block the transaction, analysts at Citibank slashed the probability of the deal going through to 5% from 30%.
SoftBank, which is the parent company of Arm, said it would begin planning for a public offering of the U.K.-based chip business.
An initial public offering of ARM could be the largest ever chip IPO. SoftBank said the offering would be made sometime in the fiscal year ending March 2023.
SoftBank also said Arm President Rene Haas would be replacing Simon Segars as Arm’s new chief executive.
Nvidia said it would record a $1.36 billion charge in the first quarter of fiscal 2023 from the termination of the deal. SoftBank will receive a $1.25 billion breakup fee from Nvidia, and Nvidia said it would retain its 20-year ARM license.
In accordance with the terms of the Purchase Agreement, the Sellers will retain the $1.25 billion prepaid by the Company, and the Company will retain its 20-year Arm license. The Company intends to record a $1.36 billion charge in the first quarter of fiscal year 2023, inclusive of the $1.25 billion prepayment provided at signing, due to the termination of the Purchase Agreement.
SoftBank bought Arm for $31.4 billion in 2016. Nvidia in September 2020 agreed to buy Arm for $12 billion in cash and 219 million Nvidia shares, or about $40 billion, but the deal was held up by regulatory obstacles. The value of the proposed transaction has risen given the appreciation in Nvidia’s stock price.
Nvidia shares were down 0.3% to $246.55. Nvidia shares have declined 16.2% year to date but have risen more nearly 73% over the past year. Nvidia’s market capitalization is about $608 billion.
Write to Joe Woelfel at [email protected]