Deal of the year: NVIDIA to acquire ARM for $40 billion

Japan's SoftBank Group is slated to sell its British chip designer Arm to US chip company NVIDIA for up to $40 billion. If the anti-competition watchdog approves it, it will be one of the largest single transaction this year. Not just the watchdog, the deal will require approval from the government of several countries. This includes Britain, China, Japan, the US and the EU. Further, the deal will potentially create a new giant in the industry. This deal will propel NVIDIA to the forefront of the semiconductor sector.

SoftBank shares surged about 9% on Monday on news of the deal. Further, it may go private with a management buyout. NVIDIA's shares soared up about 6%. In its statement, Softbank stated that it hopes to complete the deal before March 2022. Astonishingly, SoftBank bought Arm in 2016 for $32 billion, a whooping deal at that time.

ARM dominated the microprocessor industry with almost 45% market share in 2019. We can also find its chips in countless sensors, smart devices and cloud services. As for NVIDIA, the company manufactures graphic cards for the video game industry. Its products are also used for artificial intelligence and in data centres.

About the Deal

NVIDIA will pay $21.5 billion in stock and $12 billion in cash for ARM. This includes a $2 billion payment at signing. Further, it will pay SoftBank an additional $5 billion in cash or stock if Arm’s performance meets certain targets. Additionally, it will pay $1.5 billion to ARM employees in NVIDIA stock.

The company stated that under the deal it will pay SoftBank $21.5 billion in common stock and $12 billion in cash, $2 billion of which will be payable at signing. It said the deal would give it a little less than 10% in NVIDIA's outstanding shares.

On a flip side, this transaction would give SoftBank the cash that it recently in its high-profile investments in Unicorn Startups.

NVIDIA pledged that it would “continue Arm’s open-licensing model and customer neutrality.”