SoftBank in Talks to Acquire Remaining Stake in Arm
SoftBank is currently in discussions to acquire the remaining 25% stake in Arm from Vision Fund 1 (VF1), an investment fund it raised in 2017. This potential deal could provide a significant win for investors who have been waiting for strong returns.
The talks come as SoftBank prepares to list the chip designer on Nasdaq next month at a valuation of $60 billion to $70 billion.
If the negotiations lead to a deal, SoftBank would deliver an immediate windfall to VF1 investors, including Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala, who have experienced losses from SoftBank’s previous startup bets.
The alternative option of VF1 selling its Arm shares in the stock market over time following the initial public offering (IPO) would take at least one to two years and pose more risk for the fund’s investors.
A successful deal could also boost SoftBank’s chances of tapping VF1 investors for capital in the future, as it considers raising a third Vision Fund.
Son, SoftBank’s Chief Executive, has hired investment bank Raine Group to advise on the negotiations and has recused himself from VF1’s deliberations to ensure a decision is made independently in the interest of the fund’s investors.
The exact valuation for the Arm transaction is unknown, and it is possible that no agreement will be reached.
If a deal is reached, SoftBank would sell fewer Arm shares in the IPO and retain a stake of between 85% and 90%.
Arm’s IPO would not only benefit VF1 but also SoftBank, which has faced losses in the valuations of its major holdings.
SoftBank took Arm private in 2016 for $32 billion and sold a 25% stake to VF1 for $8 billion in 2017.
SoftBank has also been in talks with technology companies, including Amazon.com, to bring them on board as cornerstone investors in Arm ahead of its IPO.
Arm’s business model of licensing designs has helped it fare better than the broader chip industry, despite weakened demand for smartphones.
Cornerstone Investors
Arm’s IPO would be beneficial for both VF1 and SoftBank, especially considering SoftBank’s recent quarterly losses.
SoftBank began preparations for an IPO of Arm after a deal to sell the company to Nvidia Corp for $40 billion was blocked by antitrust regulators. Arm’s IPO could potentially raise up to $10 billion.
