One of the biggest tech deals this year — and the biggest ever in the UK — has now closed. Today, Softbank announced that it has completed its acquisition of ARM Holdings, the semiconductor firm that it said in July it would acquire for £24 billion in cash (around $32 billion in today’s currency, $31 billion at the time of the deal), in order to make a big jump into IoT. As a result, ARM will be delisted from the LSE effective September 6. Softbank has said that it plans to run the company as a standalone business.
The news comes a couple of days after the deal received its final required regulatory clearance, paving the way for the close.
“Pursuant to the terms of the Acquisition, SBG purchased all of ARM’s issued and to be issued shares (excluding any ARM shares already owned by SBG or an SBG subsidiary) for cash, for a total acquisition price amounting to approximately GBP 24.0 billion (approximately USD 31.0 billion or JPY 3.3 trillion),” the company noted in its announcement. “Subsequent to the completion of the Acquisition, ARM will be delisted from the London Stock Exchange as of September 6, 2016 (GMT) and will cease to be a listed company.”
Softbank will announce the financial and operational impact of the consolidation once it is verified, it said. The companies will start to consolidate their financials as of today.
As we reported at the time the deal was announced, the acquisition of ARM is a big play by Softbank to jump into Internet of Things technology, a sizeable pivot for a company that has made its name more recently around mobile and fixed internet services for consumers, and large investments in outsized- and fast-growing tech companies.
Masayoshi Son, Softbank’s CEO and founder, earlier this year surprised the industry when he announced that he would not retire as he had previously planned, and the acquisition — which he said took took only two weeks to initiate and close — is, in a sense, a mark of how he plans to run things in this next phase of the company’s life.
It’s in contrast to a different spin on the deal, where some believed that Softbank opportunistically swooped in on ARM because of the decline of the pound in the wake of the Brexit vote. That referendum, where the majority of voters in Britain said they wanted the UK to leave the European Union, caused a huge reverberation in the UK economy, and a drop in the value of the British pound.
“Brexit did not affect my decision,” Masayoshi Son said in a press conference the day the deal was announced. “Many people many are worried about Brexit and concerned about he complex situation of the country, but good or bad… I did not make the investment because of Brexit.”
He added that although the price of the pound declined by about 16% in the two weeks that Softbank and ARM negotiated, but ARM’s share price went up by about the same amount, meaning they cancelled each other out. There were other financial factors in play as well: in the weeks leading up to the deal, Softbank sold a chunk of its Alibaba stake and its stake in Supercell, and today it announced a large loan for some $9 billion (¥1 trillion). “This is not opportunistic about the currency,” he joked. “I have wanted to do this but was waiting for the cash to come in.
“I’m not investing in a distressed asset,” he continued. “I’m investing in a paradigm shift…. that’s my passion, and that’s my view.”
If Softbank was in the thick of it at the “beginning of the PC internet,” in Masayoshi’s words (he invested in via Yahoo when it only had 16 employees), and then doubled down on mobile (by way of Softbank’s investments in various mobile companies and acquisition of Sprint) then — he believes — IoT is the natural progression of that.
For ARM, the company has been been one of the UK’s biggest tech success stories. Its growth coincided with the rise of smartphones and its chip reference designs are used by the likes of Apple and many others.
That smartphone business is still there — just last month, longtime chip rival Intel, interestingly, announced it would license ARM’s technology for smartphone chips, in hopes of boosting its own smartphone chipmaking business (in this case to grow business with third-party smartphone chipmakers).
But more importantly, ARM has been shifting its own business to IoT for several years now, in anticipation of a time when growth of its bread-and-butter business might slow down.
(And indeed, that is exactly what’s happening: growth of smartphone sales is now essentially flat as penetration has reached saturation in many markets, and people are waiting longer to replace the phones they already have.)
While there are definitely a lot of products out there now that are “connected” — that is, many ordinary “dumb” objects like refrigerators, locks and lights can now be controlled wirelessly by way of internet connections — the bigger market for IoT products and services is really only just at its start. ARM — and now Softbank — hope that by getting into the game early, they can dominate much as ARM has done in smartphones.