Shares in SoftBank are down more than 10% after the Japanese telecommunications and internet firm announced that it plans to acquire United Kingdom chip architect ARM for £24.3 billion.
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About 20 minutes into trading in Tokyo, Softbank shares were down 10.19 percent at 5,398.0 yen after falling as low as 5,361 yen.
The British government also released a positive statement regarding the deal, saying it showed that Britain remains open for business.
Philip Hammond, Britain’s new Treasury chief, said the deal shows that Britain has “lost none of its allure to worldwide investors” in the wake of the June 23 vote to leave the European Union.
This is one of the most important acquisitions we have ever made, and I expect ARM to be a key pillar of SoftBank’s growth strategy going forward. The Japanese company is offering 1,700p in cash per share or a 43 per cent premium. ARM’s share price closed up 40.9 percent at 16.75 pounds in London, just below the offer price of 17 pounds a share.
The Cambridge-based firm designs microchips used in most smartphones, including Apple’s and Samsung’s.
But investors fear that SoftBank may be paying too much for ARM.
“SoftBank’s position as an entity outside the semiconductor industry allows ARM to retain its independence and protect existing customer relationships, while commitment to United Kingdom investment ensures management buy-in”, Jefferies analysts said in a note.
ARM Holdings, which employs 3,000 people in the United Kingdom, saw its results come in ahead of expectations in April as pre-tax profits lifted 14% to £137.5 million in the first quarter year-on-year, while revenues also stepped up 22% to £276.4 million over the period.
ARM’s revenues meanwhile jumped 15 per cent to nearly US$1.5 billion past year on the design of chips used also in computer servers.
“It is also intended that ARM will remain an independent business within Softbank, and continue to be headquartered in Cambridge, the United Kingdom”, said Son. “Softbank’s decision confirms that Britain remains one of the most attractive destinations globally for investors to create jobs and wealth”.
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“Anytime a major economy has a downward shift in the exchange rate, that’s gonna make Japanese companies who are hell-bent on expanding overseas take a look, but I think in the case of the United Kingdom, it depends very much on what kind of industry we’re talking about”, she said. He also promised to double the employee headcount from around 4,000 over the next five years.
