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SoftBank (TYO:9984) Completes Its $32 Billion Acquisition of ARM (LON:ARM)

Omar Sohail
Posted Sep 5, 2016
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SoftBank (TYO: 9984) has officially closed the acquisition of ARM (LON: ARM), which is regarded as one of the biggest tech deals this year, and the biggest ever in the UK. SoftBank stated that it would acquire the British chip designer back in July 2016, which stated that the deal would amass to £24 billion in cash, which is equivalent to $32 billion USD.

ARM (LON: ARM) Will Be Delisted From the London Stock Exchange From Today – SoftBank (TYO: 9984) Has Other Interests in the Company

ARM (LON: ARM) has stated the following in its announcement:

“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). 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.”

This news comes a couple of days after the deal received its final required regulatory clearance, which paved the way for its closing. Additionally, Softbank (TYO: 9984) will also announce the financial and operational impact of the consolidation once it is verified, and both companies will start to consolidate their financials as of today. While ARM (LON: ARM) will be delisted from the London Stock Exchange, their headquarters will remain in Cambridge and the firm has plans to double their staff over the next 5 years.

One reason why SoftBank (TYO: 9984) swooped in to acquire ARM (LON: ARM) was because of the company’s dominance in the mobile computing market. According to the company’s 2015 annual report, the British firm has generated revenue of $1.489 billion, with a total of 1348 signed licenses and more than an 85 percent market share in the aforementioned market, which is categorized into smartphones, tablets and laptops. This dominance of ARM (LON: ARM) could suggest that the company’s low-cost, low-power processors are going to be used in several electronic applications powering the Internet of Things market, which will lead to the company’s tightening its grip on this segment as well for the foreseeable future.

A company like SoftBank (TYO: 9984) has made its name around mobile and internet services for consumers, so the Internet of Things is a suitable platform for the company to extend its services there as well. Some might claim that the acquisition was more of an opportunity than a vested interest in the company, especially during the wake of the Brexit vote. However, Masayoshi Son, CEO and Chairperson of SoftBank (TYO: 9984) voiced his opinion in a press conference by stating the following:

“Brexit did not affect my decision. Many people many are worried about Brexit and concerned about the complex situation of the country, but good or bad… I did not make the investment because of Brexit.”

Set against the backdrop of the Japanese government statement to the UK/EU in the wake of Brexit which we will be analysing further, the Softbank acquisition of ARM only serves to reinforce possible concerns about Japanese investment in the UK and ensuring that the transition is as smooth as possible for all involved.

Masayoshi also said that the price of the pound declined by about 16 percent in the two weeks that both companies negotiated, and ARM’s share price went up by the same percentage written above, which cancelled this out. In fact, Masayoshi had been wanting to do this for quite some time but was waiting for the cash to come in. To have the funds necessary for this acquisition, SoftBank (TYO: 9984) sold a portion of its Alibaba and Supercell stake, and today, it’s announced for a massive loan of $9 billion, but hasn’t provided a reason why it would need such a massive amount.

What vested interest do you think ARM’s acquisition will serve for SoftBank (TYO: 9984)? Tell us your thoughts right away.

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