Cambridge-based ARM Holdings, the company behind the massively successful ARM chip, has agreed to be sold to Japanese tech firm SoftBank for £24.3bn after its board said it would recommend the all-cash deal to shareholders
ARM are best known for the microchips that Apple uses in its iPhone and iPad products. It is estimated that ARM chips have been used in around 95% of all smartphones.
The offer from SoftBank values ARM at £17 a share. That price values the company at more than 43% Friday’s closing share price and 41% more than its all-time high share price. ARM’s revenue last year was around £1bn, making it small by global chip standards. The purchase price is equivalent to 70 times its net income last year.
Shareholders would be set to receive a 3.78p dividend per share. This makes the deal a multi-million-pound windfalls for ARM board members.
Despite being known for CPU’s ARM do not manufacture anything. They operate using an intellectual property model that licences out its designs. This leaves it with a high-profit margin which would fit well with SoftBank’s existing businesses.
Who Are Softbank?
SoftBank current business spans telecoms, the internet and robot technology. They are best known in Europe and the US for their 2013 £17bn acquisition of a controlling stake in mobile operator Sprint.
They believe that ARM will allow them to take the next step into “the internet of things”.
The Internet of Things is seen by many as the next big development of the Internet in which everyday objects would have network connectivity, allowing them to send and receive data. However to do these new internet-of-things devices will have to rely heavily on the small, power efficient processors ARM is known for.
Softbank is promising to invest in ARM’s UK workforce by doubling the companies Cambridgeshire staff from 1,600 as well as increasing the companies headcount outside of the UK over the next five years. ARM total workforce is around 4,000 currently worldwide. However, Softbank and ARM’s current board have committed to keeping its HQ and top management in the UK.
Whilst discussions seem to have been underway for many months, the battering of UK Sterling after the vote to leave the EU and the strengthening of the yen over recent weeks mean that deal is 12% cheaper for Softbank than a month ago, and over 30% cheaper than it would have been a year ago.
How does ARM dominate mobile processing market without making processors?
Despite ARM’s dominance in the mobile processors sector ARM doesn’t actually make chips.
