In what would be the largest transaction ever in the global semiconductor industry, Nvidia has agreed to acquire British chipmaker ARM from Japanese conglomerate SoftBank for $40 billion. In a joint statement published on Sunday, SoftBank and Nvidia confirmed that they had already reached an agreement for the acquisition.
The companies revealed that payment for the deal will be done through a mix of cash and stock. As part of the deal, Nvidia has agreed to retain ARM's headquarters in Cambridge. Nvidia stated that it actually plans to build an extension within the campus that will house a new research and development facility.
The acquisition is expected to greatly expand Nvidia's market share in the global chipmaking industry. Nvidia's current business is mainly focused on the manufacturing of chips used for graphics processors for PC gaming and autonomous driving technologies. With the acquisition, Nvidia will be able to expand into other sub-categories such as making chips for smartphones, connected devices, and even 5G telecommunications equipment.
Nvidia's chief executive officer, Jensen Huang, wrote in a letter to employees sent out on Sunday that the company plans to maintain ARM's current business model; referring to its open-licensing operations. Huang added that the company is planning to expand ARM's licensing portfolio in the coming years.
While both companies may have already reached an agreement, the deal is expected to face multiple hurdles from both UK regulators and Nvidia's rivals. Several UK politicians have expressed concerns over the possible job losses that would result after the deal. Meanwhile, Nvidia's competitors that mostly purchase chips from ARM, are also likely to object to the merger.
On Monday, the UK Prime Minister's office stated that it will not hesitate to launch an investigation into any merger that will have a major impact on the country's economy.
SoftBank's originally acquired ARM in 2016 for $32 billion, which was the largest takeover by a Japanese firm during that time. The sale of the company is the latest in a series of divestments for SoftBank, which had stated that it needed to increase liquidity in response to the economic slump caused by the coronavirus pandemic. In March, the Japanese firm revealed plans to sell up to $41 billion worth of assets this year.