SoftBank to Acquire UK-Based Chip Designer ARM for $32 Billion in Cash

Japanese company SoftBank has announced that it will acquire Cambridge, UK-based chip designer ARM Holdings for more than $32 billion in cash, a strong bet on the future of the Internet of things. The deal is subject to the approval of ARM’s shareholders and of the English court (via the Financial Times, the WSJ).

Softbank arm

“ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the ‘Internet of Things,’” SoftBank Chief Executive Masayoshi Son said. “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,” he said. ARM’s shares rose as much as 45% in Monday morning trading in London.

ARM’s technology was originally developed in the 1980s at Acorn, a UK-based computer maker, and was spun off into a separate company with backing from Apple. Its technology was used in the first-generation mobile devices such as the Apple Newton, an early device in the PDA category, released 23 years ago. ARM currently employs 4,000 people and SoftBank plans to create at least 1,500 new Arm jobs in the UK in the next five years, as well as increase hiring overseas. SoftBank also said ARM would maintain its headquarters in Cambridge.

ARM’s business model relies on licensing its technology to hardware makers such as Apple and Samsung. It receives a small royalty for each device, but since last year 15 billion chips based on its technology have been shipped (up 3 billion from a the previous year), which doesn’t appear to be a problem for the company. As reported by the Financial Times, nearly half of those chips were in mobile devices, but there was also strong growth in chips for the Internet of things.

Intel has been rumoured as a possible bidder for the company, which reported £1 billion in revenue last year, as it is a possible solution to breaking into the mobile devices market. SoftBank came up with the cash first, however.