In a strategic move that underscores the shifting dynamics of the tech industry, SoftBank Group Corp has acquired the remaining 25% stake in UK chip designer Arm Ltd. This acquisition, which values Arm at a staggering $64 billion, is seen as a significant step in stabilizing the company's stock price as it gears up for a much-anticipated listing next month.
The deal involved SoftBank purchasing the stake from its Vision Fund, a colossal $100 billion fund backed primarily by Saudi Arabia and managed by SoftBank itself. Insiders privy to the transaction details have indicated that SoftBank's valuation of the Vision Fund's stake stands at around $16 billion. This is notably double the amount the Vision Fund had initially shelled out for the stake in 2017.
SoftBank's acquisition of Arm in 2016, led by its visionary leader Masayoshi Son, was a headline-grabbing affair, with the conglomerate shelling out $32 billion. With plans now in motion to list Arm in New York, initial details about the IPO are expected to be unveiled to the public come Monday, according to sources close to the preparations.
This internal transaction is not just a mere reshuffling of assets. It guarantees returns for the Vision Fund's primary investors, which include heavyweight sovereign wealth funds from Saudi Arabia and Abu Dhabi. These entities had collaborated with SoftBank in 2017 to launch the ambitious tech-focused Vision Fund. This success is particularly sweet for the Vision Fund, which has faced its share of challenges, including less-than-stellar investments in companies like WeWork and FTX, leading to significant layoffs last year.
The transfer of the stake back to SoftBank is seen as a strategic move to assuage potential Arm investors. It eliminates uncertainties regarding the Vision Fund's plans to offload its stake post-IPO. Those in the know suggest that this deal is a testament to SoftBank's confidence in securing a higher valuation for Arm during its public listing. The initial agreement with the Vision Fund in 2017 had capped SoftBank's potential returns, offering little room for additional gains if Arm's IPO valuation surged past the $64 billion mark.
As of June's end, SoftBank's financial disclosures pegged a fair-value assessment of Arm at $45 billion, a 13% uptick from the preceding quarter. With this acquisition, SoftBank is positioning itself to woo public market investors, who have been starved of significant tech listings for almost two years. The conglomerate is betting on these investors recognizing and rewarding Arm's pioneering role in smartphone technology and its ventures into the automotive, data centers, and artificial intelligence sectors.
The unfolding of this saga will be keenly watched by industry stakeholders and investors alike, as it could set the tone for tech IPOs and mergers in the near future.
