NVIDIA Drops The Ball On Arm Acquisition Generating Rumors For Latter’s IPO

Nvidia CEO. Mr. Jen-Hsun Huang at Computex, Taipei in 2017; Associated Press

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Silicon designer NVIDIA Corporation's plan to acquire British design house Arm Ltd. is moving slowly since the company is yet to submit documentation to the European Union's monopoly and competitive regulation authority. NVIDIA announced the decision to acquire Arm late last year and at the time outlined that it expected the deal to close by March next year. It also remained open to the possibility of closure extending to September, and if we're to go by a new report by The Telegraph (courtesy of Tom's Hardware!), this might very well turn out to be the case.

Arm Might Publicly List Shares In New York If NVIDIA Deal Falls Through Believe Sources

According to The Telegraph, NVIDIA is yet to submit documents to the European Commission for its Arm acquisition offer. The Commission is responsible for approving mergers in the European Union, and today's report comes after The Information claimed last month that the regulatory body had warned NVIDIA of the consequences of submitting documents late.

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Back then, The Information had reported that:

Making matters worse, the regulatory agency told the companies that if they don’t submit a lengthy approval request by the end of this month—which seems unlikely to happen—then they should wait until September so that the review wouldn’t start during Europe’s summer vacation months, two of these people said.

Now, The Telegraph reports that the deal will be evaluated in September after the Commission members return from their summer break. Additionally, it cites anonymous sources to claim that Arm might list its shares for an initial public offering (IPO) if the NVIDIA deal remains unapproved by the regulatory bodies. These shares will be sold in New York, believe the publication's sources, with no other details being available for the time being.

NVIDIA chief Jen-Hsun Huang during an event.

According to The Telegraph:

Arm's current owner, SoftBank of Japan, still hopes to complete the deal, which would make it a major shareholder in Nvidia. Its shares are up 50pc since the deal was announced.

However, sources close to the parties said that if delays and competition hurdles prove insurmountable, a stock market float remains under consideration. New York is viewed as the most likely venue, although one source said no formal process is underway.

Given Arm's ubiquity in the tech world, NVIDIA's offer is facing significant scrutiny not only in Europe but also in China. The country's market regulation authority, the State Administration for Market Regulation (SAMR), has also consulted companies who believe their interests might be harmed if the deal goes through. Unconfirmed reports have suggested that embattled Chinese telecommunications firm Huawei Technologies Ltd. has raised concerns for the deal, worrying that its access to Arm's chip designs stands at risk.

The difficulties in China are accompanied by those the deal is facing in the United Kingdom, where the Competition and Markets Authority (CMA) is investigating it for potential threats to British national security.

At the American firm, San Diego, California-based chip designer Qualcomm Incorporated is opposing the deal. Qualcomm designs semiconductors for various applications such as smartphones, routers and connected vehicles, and The Telegraph has previously reported that the company is willing to invest in Arm if NVIDIA's bid is unsuccessful.

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Arm's chief executive officer Mr. Simon Segars prefers an acquisition over an IPO since he believes that the latter will not provide his company with adequate funds to expand in the growing artificial intelligence sector.

In a blog post earlier this month, the executive explained that:

There’s been a lot of ill-informed speculation out there about what the future of Arm with NVIDIA will look like. Some believe that an initial public offering (IPO) would have been a better path. Others are concerned that Arm will leave the UK, while some have fears that Arm will become anti-competitive. These assumptions couldn’t be further from the truth and I’d like to address them head-on.

The combination of Arm and NVIDIA is a better outcome than an IPO. The level of investment that will be needed to lead in AI will be unprecedented. We’ve been down this road before when we predicted a major market shift in 2016. We knew that we needed to invest heavily in our products, talent, and technology to take advantage of the opportunities ahead. The initial investments came when SoftBank acquired Arm; it enabled us to build new technologies that expanded our reach into data centers, the automotive and networking industries, all while retaining our leadership in mobile.

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