SoftBank aims to keep control of Arm after IPO – report

Japanese owner may not believe it would get the valuation it has been seeking for a full sale

SoftBank is said to be planning to keep a controlling stake in Arm after its public offering, rather than divesting itself of the chip design firm as had been thought. The move may indicate that SoftBank does not believe it would get the valuation it has been seeking for a full sale of Arm.

The planned initial public offering (IPO) for Arm was set to value the chip designer at up to $60 billion, but according to Bloomberg, owner SoftBank is now considering selling off a smaller portion of the business than originally planned so that it can retain a controlling interest in the company.

One reason for this may be that SoftBank is concerned by the current supply chain issues that are affecting the semiconductor market and which have led to a fall in the value of chip company stocks as investors lose confidence. The Japanese conglomerate may have decided that it is better to hold on to much of Arm for now and wait for better market conditions.

We contacted SoftBank for confirmation regarding whether it intended to retain a controlling stake in Arm, but the firm declined to comment.

SoftBank acquired Arm back in 2016, but in recent years it has been rumored to be dissatisfied with the chip designer's business model, meaning that it didn't think Arm was making enough profit and wanted it to charge more for licensing its technology.

In 2020, the rumor mill suggested that SoftBank wanted to divest itself of Arm, and Nvidia stepped forward as the potential buyer in a deal that valued the chip designer at $40b.

However, the sale to Nvidia attracted the attention of various government regulatory bodies, including the US Federal Trade Commission, the European Commission, the UK government’s Competition and Markets Authority, and even the Chinese authorities.

Concerns were raised that the acquisition might stifle competition by giving Nvidia the power to limit access to Arm's chip designs.

The sale to Nvidia eventually collapsed in February, with it and SoftBank citing the regulatory hurdles as the reason. SoftBank then said it intended to pursue a public offering for Arm within the fiscal year ending March 31, 2023.

Goldman Sachs was reported to have been chosen to head up the Arm flotation, with SoftBank said to be pursuing a valuation of at least $60b, due to the share price of the company having risen since Nvidia made its original offer.

The latest twist likely means that SoftBank no longer believes it would no longer get this price, and is perhaps seeking to gradually reduce its stake in Arm over time instead.

"SoftBank wants to get a return on its investment in Arm, but it is impossible to sell it to any single global player because of its importance as an independent provider of chip designs," said Andrew Buss, IDC's research director for European Enterprise Infrastructure.

Buss said that a comparison could be made with VMware, the cloud and virtualization specialist of which Dell had majority ownership for many years, without this situation worrying investors, customers or partners unduly. VMware was eventually spun out as a separate company last year.

However, Buss warned that it could be difficult for Arm to pursue a completely independent market strategy while it still has one single owner that has majority control.

Last month, Korean chipmaker SK Hynix was reported to be considering forming a consortium with other interested parties in order to acquire Arm.

The consortium could have included Intel as CEO Pat Gelsinger previously had intimated the firm would be interested in participating in any such arrangement that emerged to take ownership of Arm. ®

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