American graphics hardware giant Nvidia announced on Sunday that it has entered a definitive agreement with SoftBank Group Corp. (SBG) to acquire British chip and IP design company Arm in a $40 billion transaction.
As part of the deal, Nvidia will pay SBG $12 billion in cash and $21.5 billion in Nvidia common stock. Moreover, SBG may also receive up to $5 billion in cash or common stock under an earn-out construct, provided Arm achieves some specific financial performance targets.
Nvidia will also pay $1.5 billion in equity to Arm employees.
Arm - which designs chips for a wide range of consumer products - will operate as a division of Nvidia after completion of the deal. Nvidia has also promised to provide Arm more support for its R&D efforts as well as access to Nvidia's entire suite of products.
Arm will retain its headquarters in Cambridge and will "continue to operate its open-licensing model, while maintaining its global customer neutrality," the company said.
Nvidia has also promised to establish a state-of-the-art AI research centre in Cambridge and to build an AI supercomputer powered by Arm CPUs, which will be hosted at the company's headquarters.
The American firm expects the deal to help expand its presence in artificial intelligence (AI) and mobile computing, enabling it to reach more devices and platforms, such as PCs, smartphones and autonomous vehicles. The company said that the Arm's acquisition would create "the premier computing company for the age of artificial intelligence," supporting developments in robotics, life sciences, healthcare, autonomous driving and other fields.
Both firms expect the deal to close within 18 months, following regulatory approval in different countries, including the US and UK. Because Nvidia is a licensee of ARM chips, the deal is likely to draw opposition from other licensees. Last week, the UK's Labour Party urged the government to intervene in the takeover. Two of ARM's co-founders have also raised other issues about the proposed buyout deal.
SoftBank acquired Arm Holdings in 2016 for $32 billion, and at the time it was SoftBank's largest-ever acquisition. SoftBank's chairman Masayoshi Son and Arm CEO Simon Segars described the acquisition as historic, saying that it would bring together the two companies "with a shared vision and ambition, driven to empower the world with technology that makes life easier, safer and more fulfilling".
Last year, Arm CEO Segars said that SoftBank wants to return the chip designer to the public market by 2023.
In 2016, when SoftBank acquired Arm, Nvidia was worth about $30 billion. Today, the firm is valued at $300 billion.
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