In many ways it is no surprise that Britain’s ARM Holdings has attracted a £24bn takeover bid from Japan’s SoftBank Group. The only surprise is that it hasn’t happened before now.
After all, ARM is the UK’s largest technology company which has, from its headquarters in Cambridge, reached every corner of the earth as a result of the mobile phone revolution.
While many people may not recognise ARM as a technology brand, its pioneering low energy-use chip designs completely dominate the global smartphone processors market and also appear in billions of other devices from tablets and robotic toys to drones.
The FTSE 100 company – spun out of Acorn Computers, the company behind the BBC Microcomputer, 20 years ago as a joint venture with Apple – is also forging its way into new markets, such as driverless cars.
In short, this is a company that sums up the best of British ingenuity and technological know-how and pays tribute to the much vaunted scientific hub that has been fostered in Cambridge over the years.
SoftBank, founded by Masayoshi Son – the “Warren Buffett of technology investment” – wants to propel ARM onto the same level as Amazon, Apple or Alibaba by creating new microchips to help power the “internet of things”.
Son, whose SoftBank Group has made 290 acquisitions in the past six years at a cost of $72bn (£55bn), said he had held a decade-long desire to buy ARM.
This deal is significant in a number of ways, not least because it was the first big transaction to be announced after Britain’s shock Brexit vote.
Will the deal go ahead? Probably. It is a cash offer for shareholders which is always tempting at a very uncertain time for Europe and when ARM could face future challenges as the rise in smartphones slows after years of exponential growth.
It is also hard to see who could be an obvious contender to gatecrash the party. Qualcomm, Intel or even Apple may well fancy ARM but could find themselves embroiled in all kinds of regulatory issues if they tried to make an offer. A counter bid does not seem a likely scenario.
Chances are the takeover, which has been recommended by the boards of both companies, will become effective on 5 September if approved by shareholders. However, as is ever the case with large-scale merger and acquisition activity, the question remains as to whether a SoftBank takeover of ARM is ultimately good for the company and for Britain in the long run.
Hermann Hauser, founder of Acorn, has already raised fears that Britain’s largest technology company could be milked for cash by SoftBank after the takeover and said its “loss” was a “sad day for British technology”.
Critics of the deal have already questioned if taking on ARM is too much of a handful for the already heavily leveraged SoftBank, while eyebrows have been raised that a bevy of City bankers, lawyers and PRs are to share a whopping £106m in fees between them.
However SoftBank’s Son has promised a lot. He has made a legally binding “undertaking” – a test case under new City Code on Takeovers and Mergers – to double the size of ARM’s workforce in Cambridge within five years. This could mean 1,600 new high-tech jobs in an area already crucial for employment in Britain’s high-tech industry.
The takeover will also likely enrich the fortunes of many ARM workers who will share in a £300m payday by virtue of the company’s very generous share option schemes. Indeed, we could well witness a new generation of ARM millionaires boosting investment in everything from Cambridge’s posh housing market to new tech start-ups.
One banker involved in the transaction said the deal could only be a “good thing” as Mr Son, an already formidable entrepreneur, wanted the ARM acquisition to be his “legacy” adding: “[The deal] is like manna from heaven and you have someone who also wants to double the UK workforce at ARM holdings in five years. That can only be a good thing.”
Deirdre Hipwell is retail and M&A editor for The Times
