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Nvidia drops Arm deal – will Cambridge chip firm IPO in the UK?

Nvidia Arm IPO
Image credit: Ascannio / Shutterstock

Nvidia has abandoned its $40bn (£29.6bn) takeover of Cambridge-based chip designer Arm due to “significant regulatory challenges”. Arm, widely regarded as the “crown jewel” of the UK tech industry, will instead pursue an IPO.

US-based Nvidia first announced plans to acquire Arm from Japan’s SoftBank in September 2020, but the deal has been impeded by regulatory probes in the UK, EU, US and China.

Arm, which designs and licences processors used in many of the world’s smartphones and computers, said it aims to go public before March 2023.

SoftBank CEO Masayoshi Son indicated that Arm will most likely list on the US Nasdaq in what would mark a blow to London’s IPO markets.

Nvidia and Arm said in a joint statement that they would continue to work together. Nvidia designs GPUs used for applications including gaming, data science and artificial intelligence.

“Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come,” said Jensen Huang, founder and CEO of Nvidia. “Arm is at the centre of the important dynamics in computing. Though we won’t be one company, we will partner closely with Arm.”

Arm CEO Simon Segars is also stepping down, with Rene Haas, president of Arm’s IP group, taking over with immediate effect.

The collapse of Nvidia’s acquisition of Arm will come as little surprise to those following the deal.

The takeover, which would have been the largest in the semiconductor industry, attracted the attention of competition regulators on both sides of the Atlantic.

They were concerned that Nvidia could restrict its rivals’ access to Arm’s intellectual property, leading to higher prices, weakened innovation and less choice.

Despite this, Nvidia and Arm remained optimistic that a path forward could be found.

The UK’s Competition and Markets Authority (CMA) launched an investigation into the deal in July 2021 following a public interest intervention on national security grounds.

The deal was further threatened by the US Federal Trade Commission, which sued Nvidia in December 2021.

While the acquisition was initially valued at $40bn, the surge in Nvidia’s share price meant the value of the cash and stock deal jumped to $87bn last November.

SoftBank will receive a break-up fee of up to $1.25bn. The story was first reported by the Financial Times.

Arm IPO: Will ‘crown jewel’ remain in the UK?

Attention will now turn to Arm’s future position in the UK. Founded as Advanced RISC Machines in 1990, the Cambridge company now employs 6,500 staff globally, with 3,000 of those in the UK.

When SoftBank acquired Arm in 2016 for $32bn (£23.4bn), critics bemoaned the deal as a failure to protect one of the UK’s leading technology companies.

Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, said the collapse seemed “all but inevitable and comes as little surprise”.

He added that the focus should now be on ensuring Arm remains a UK company.

It comes as the UK government has introduced regulatory changes to make London a more attractive destination for tech IPOs.

In 2021, UK tech IPOs raised a record £6.6bn – but was dwarfed by the $69.3bn (£47bn) that was raised by tech IPOs in the US’ Nasdaq and New York Stock Exchange.

“We simply must protect our digital sovereignty by maintaining ownership of Arm – a jewel in the crown of our semiconductor industry,” Shaw said. “If Softbank’s aim is now to float Arm’s shares on the stock market by next year, then it is essential that it happens in the UK –  and the London Stock Exchange becomes Arm’s new home.”

UKTN has contacted Arm and SoftBank for comment.