What you need to know
- Nvidia's $40 billion acquisition of Arm from SoftBank has reportedly fallen through.
- The GPU manufacturer supposedly walked back the merger amid regulatory challenges in the U.S., EU and UK.
- SoftBank is rumored to be planning an initial public offering to divest Arm as a recourse.
Nvidia's $40 billion acquisition of Arm from SoftBank has been met with tough regulatory hurdles from the beginning that rumors of the deal collapsing came as no surprise last month. Those rumors appear to have been true, as the GPU maker has reportedly backed out of the transaction.
The Financial Times reports that Nvidia has abandoned its takeover of Arm, citing people privy to the matter. The deal became official in September 2020 in what would have been the biggest transaction in the chip industry.
However, due to competition concerns, regulators in the European Union, United Kingdom, and the United States were immediately put on notice. The U.S. Federal Trade Commission filed a lawsuit late last year to block the merger, citing how Arm's technology is used in a variety of industries, including mobile devices, which include the best Android phones and tablets.
The FTC was concerned that the agreement would jeopardize its open licensing strategy in the long run. And it's not without foundation. Arm licenses its semiconductor designs to Nvidia's closest rivals including Qualcomm, AMD and Intel. So it makes sense to assume that giving Nvidia control of Arm's architecture and intellectual property would stifle competition.
Softbank is also replacing Arm CEO Simon Segars with Rene Haas, the company's current head of intellectual property. According to the report, the executive shakeup is the result of the deal's failure. In a statement to TechCrunch, Haas confirmed Segars' resignation:
He has decided that at this stage of his career, the time and energy required to take the company public and everything around that was not something he wanted to sign up to. So he's going to step down. I'm going to take over for him.
Instead of spending a huge amount to acquire Arm, Nvidia will only be paying up to $1.25 billion in break-up fee to SoftBank. The Japanese multinational holding company is also said to be resorting to its earlier plan of divesting Arm through an initial public offering this year.
