Softbank Group has agreed to buy British semiconductor maker ARM Holdings for Pounds 24.3 billion (about US$31.4 billion) in cash, the companies announced Monday.
Softbank agreed to pay a hefty premium for ARM, with a price of 1,700 pence (about US$67.28) per ARM share, which is a 42.9 percent premium over the $47.08 closing price as of Friday, the last business day before the deal was announced.
The surprise move will help Softbank gain a solid foothold in the Internet of Things, considered the next major wave of development in the enterprise computing business.
Softbank plans to preserve the ARM organization — including its senior management team and brand-partnership-based business model and culture — and it will keep the company headquarters in Cambridge, England.
In addition, Softbank plans to at least double its employee headcount in the UK and increase the headcount at ARM over the next five years.
“We have long admired ARM as a world renowned and highly respected technology company that is by some distance the market leader in its field,” said Softbank chairman and CEO Masayoshi Son. “ARM will be an excellent strategic fit within the Softbank Group as we invest to capture the significant opportunities provided by the Internet of Things.”
The ARM board sees the Softbank deal as a compelling offer and has been reassured that ARM will remain a very significant UK business and will continue to play a key role in the development of new technology, said Chairman Stuart Chambers.
ARM is a major semiconductor intellectual property supplier, with a core business in scalable, highly energy-efficient processors. Its technology is embedded in more than 95 percent of smartphones and more than 30 percent of all chips with processors sold worldwide in 2015, the company said.
“This looks to be a strategic investment by Softbank in the semiconductor business,” said Kevin Krewell, principal analyst at Tirias Research.
“By buying ARM, Softbank has a piece of the growth segments in the semiconductor business — IoT, smartphones, automotive and servers — because ARM’s IP is licensed by every major company in these markets,” he told the E-Commerce Times.
Softbank may see the ARM acquisition as a long-term diversification strategy, suggested Dilip Sarangan, mobile and wireless communications industry principal at Frost & Sullivan.
It could be hedging against the limited success of some of its core businesses, including U.S. wireless provider Sprint, he told the E-Commerce Times.
“The slow growth of Sprint and the diminishing role of the carrier likely led to the move from Softbank,” Sarangan said. “Sprint was seen as an acquisition that could help Softbank grow despite the market pressures in Japan. However, with Sprint having failed to provide that growth, Softbank may be looking to diversify its product portfolio to capitalize on IoT revenue growth, rather than subscriber growth in the U.S.”
The ARM deal ultimately is bad news for Sprint in the U.S., said Michael Jude, a program manager at Stratecast/Frost & Sullivan.
In light of Sprint’s inability to complete a merger with T-Mobile, the lack of future investment from Softbank will lead to longer-term questions about the viability of the company, he told the E-Commerce Times.
“Softbank probably wants to minimize its exposure until it can find a way to divest itself of its Sprint holdings at minimal loss, and is looking for other investment opportunities,” Jude reasoned.
The ARM deal came about six weeks after Softbank announced it would sell a $7.9 billion stake in Alibaba Group in order to reduce its debt and increase its liquidity. Both the Softbank and Alibaba boards had agreed to the coordinated deal.
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