SoftBank to buy chip-designer ARM for £24.3bn

Acquisitive Japanese company swoops for iconic British chip designer

ARM, the British semiconductor designer, has agreed to a £24.3bn buy-out offer from Japan's SoftBank Group in a deal announced to the London Stock Exchange this morning.

The SoftBank purchase will be among the biggest-ever M&A deals in tech - and certainly the biggest in the UK.

It is also the largest-ever overseas acquisition by a Japanese company, although the announcement may also flush out other interested bidders.

These include licensees Samsung, TSMC and Qualcomm, although a takeover by a licensee may also endanger the company's pioneering intellectual property licensing business model that has enabled the company to dominate the market for mobile microprocessor technology.

Chip-maker Intel, however, would probably be barred from entering the fray on the grounds of competition and its ownership of ARM would also disrupt the company's intellectual property licensing business model.

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."

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 itself.

The approach cut costs for both licensees and (crucially) ARM, which did not have much capital with which to invest, and the company was well-placed to take advantage of the rising demand for high-powered, but also power-efficient, microprocessors for the burgeoning mobile market in the 1990s and 2000s.

In the early days, it primarily competed with MIPS and Hitachi, but its combination of technology and business model gave it a critical advantage. This enabled it to put together hundreds of licensees who could customise the designs according to their precise needs, cutting their costs and making ARM a de facto standard.

The business model also provided opportunities to companies shut-out of market sectors by Intel's dominance.

SoftBank, meanwhile, is a peculiar Japanese multinational. Established in September 1981, it originally expanded by acquisition in the media sector, for example, with the purchase of the COMDEX computer trade shows in 1995. Recently, it has offloaded some of its multifarious acquisitions to focus on mobile and tech.

SoftBank's ARM purchase will make it the biggest-ever overseas acquisition by a Japanese company - after SoftBank's own $20bn deal for 70 per cent of US mobile operator Sprint in 2012.