Nvidia abandons Arm acquisition following regulator scrutiny

SoftBank will ready Arm for IPO and receive a break-up fee.

nvidia arm consoles
Image via Nvidia

Nvidia and SoftBank Group Corp have pulled the plug on their $40 billion plans for Cambridge-based chip maker Arm after it was in the works for nearly two years. The deal, which would have seen Arm merge with Nvidia, buckled following scrutiny from several regulatory bodies, including the U.S., the U.K., and the European Union, according to sources close to the Financial Times (via Ars Technica).

Nvidia’s acquisition of Arm was set to be the largest semiconductor deal in the history of the industry, sparking concerns among regulators that the deal may create unfair competition within the semiconductor market. The merger also faced opposition from other industry leaders who use Arm designs in their products, including Google, Qualcomm, and others. Nvidia’s acquisition of Arm was rumored to be dropped late last month, making this a fairly quick end to a drawn-out ordeal.

Financial Times sources revealed that Nvidia decided to drop the deal during a board meeting yesterday.

“The parties agreed to terminate the Agreement because of significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties,” both companies said in a joint statement. “Arm will now start preparations for a public offering.”

SoftBank will look to ready up Arm for an initial public offering (IPO) following the botched deal. The company is aiming for the IPO to happen as soon as March 2023, according to the statement.

Before the IPO happens, Nvidia will have to hold up its end of the bargain and shell out a break-up fee to both SoftBank and Arm. Nvidia will be on the hook for $1.25 billion with the deal falling through. Nvidia will also retain a 20-year Arm license.

“Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come,” Nvidia CEO Jensen Huang said.

It’s not all smooth sailing, though. Arm CEO Simon Segars is set to be replaced by Rene Haas amid the aftermath of the failed merger, according to the Financial Times’ sources. It’s unclear whether the change in leadership is a direct result of the failed deal or a culmination of events.

The acquisition faced opposition from the U.S. Federal Trade Commission (FTC)—which sued to block the deal—the U.K.’s Competition and Markets Authority (CMA), and the E.U.’s European Commission. Each regulator expressed concern in keeping competition fair within the market. China’s regulatory body was also asked to review the deal, but the process would likely have taken up to 18 months, according to CNBC.

The deal would have needed approval from the E.U., U.S., and U.K. regulators. Even if Nvidia and SoftBank had gotten the approval of these regulatory entities, they would have still had to face China, which seems like a gamble with the U.S. locking China out of TSMC chips.