BRITISH MICROPROCESSOR designer ARM, an icon of the UK's technology sector, has agreed a £24.3bn cash sale to Japan's acquisitive SoftBank Group in a surprise deal announced this morning in a statement to the London Stock Exchange.
The purchase by SoftBank will be one of the biggest M&A deals in tech, and certainly the biggest in the UK.
The agreed takeover may spark a bidding war for ARM, which produces technology that has become the de facto standard for mobile microprocessors. The company represents the main competition for Intel.
Other companies that may be interested include licensees Samsung, TSMC and Qualcomm, although a takeover by a licensee may endanger the company's pioneering intellectual property licensing business model.
This innovation, perhaps more than the technology, enabled ARM to dominate the market for mobile microprocessors and emerge as the most potent challenger to Intel.
The deal agreed between ARM and SoftBank is valued at £17 per share and will give ARM shareholders a 43 per cent premium on Friday's closing price.
ARM CEO Simon Segars said: "We weren't looking to sell the company because we believe our standalone prospects are really compelling. So when SoftBank approached us with an interesting and intriguing proposition, it was something that we had to look at."
He added that SoftBank offered a stack of cash that could scarcely be turned down, but also "a future that is more exciting than we could achieve on our own".
"At £17 a share, the board believes this really fairly values the company and, in terms of the future, ARM and SoftBank share a vision of the way that technology is going to change people's lives and enable communication and collaboration around the world," said Segars.
He added: "With SoftBank's backing, and the level of investment that they can make into the business, we believe we will be able to achieve more than we could standing on our own. Together, this deal is a very interesting, fascinating offer to enable the next chapter of growth for ARM."
However, SoftBank isn't necessarily awash with ready cash just gagging to be invested in ARM. While it recently offloaded Supercell, the maker of Clash of Clans, for $8.6bn, and sold-off a stake in Chinese ecommerce website Alibaba for $10, that followed the $20bn purchase of 70 per cent of US mobile operator Sprint in 2012.
It has put together a one trillion yen bridging loan with Mizuho Bank to part-cover the 3.3 trillion yen cost of acquiring ARM, which will be refinanced with a long-term borrowing deal over the next six months or so.
Let's hope there's no 2008-style global financial crisis in the interim.
Among the promises that have been made are that SoftBank will "preserve the ARM organisation, including ARM's existing senior management team, brand, partnership-based business model [and the] headquarters of ARM in Cambridge", according to the offer documents.
SoftBank has also formally promised to double ARM's UK headcount and increase the number of staff outside the UK over the next five years.
Promises solemnly made during acquisitions, however, are often quickly discarded after completion.
The deal may also test new prime minister Theresa May's policies on business, including her planned industrial strategy.
ARM was formed as spin-out from home computer pioneer Acorn in 1990. It was originally called Acorn Risc Machines before changing its name to Advanced Risc Machines, then simply ARM. Its first CEO, Robin Saxby, focused the company on intellectual property licensing rather than producing hardware.
The approach cut costs for licensees and ARM, and the company was well placed to take advantage of the boom in demand for low-cost, high-powered and energy efficient mobile microprocessing.
In the early days, ARM competed primarily with MIPS and Hitachi, but MIPS failed to put together the vast portfolio of licensees or offer the range of tools that ARM could. Hitachi, meanwhile, offered parts, rather than licensing its intellectual property.
SoftBank, meanwhile, is a peculiar Japanese multinational. Established in September 1981, the firm expanded originally by acquisition in the media sector, for example, with the purchase of the Comdex computer trade shows in 1995 and, a year later, Yahoo Japan. The company has recently offloaded some of its acquisitions to focus on mobile and tech.
SoftBank's ARM purchase will make it the biggest overseas acquisition by a Japanese company after SoftBank's own $20bn deal for 70 per cent of US mobile operator Sprint in 2012. µ
Tabs to more Ctrl and less Win. Such Fn.
Either that or it's a really intense holiday