SAN FRANCISCO – Silicon Valley chipmaker Nvidia is ending its nearly 18-month bid to buy Arm, which licenses chip technology used in most smartphones, said two knowledgeable people who were not authorized to discuss it. to talk.
Nvidia, a fast-growing company whose chips are best known for displaying graphics in video games, offered $40 billion in cash and stock to ARM in September 2020, making it the most expensive deal ever among chip companies. Nvidia made the offer to buy Arm from SoftBank, the Japanese conglomerate that has owned the British company since 2016. Nvidia’s soaring share price later boosted the transaction’s value, which came to roughly $60 billion on Monday.
But the blockbuster deal has encountered setbacks, including a lawsuit from the Federal Trade Commission in December to block the takeover, as well as opposition from regulators in Britain.
The end of the deal is a blow to Nvidia and its CEO, Jensen Huang, who has propelled the company’s chips into new applications, such as artificial intelligence software from giant cloud companies. Mr. Huang argued that Arm, whose microprocessor technology is incorporated into more than 25 billion chips sold each year, could help Nvidia gain a broader foothold in data centers on par with rivals like Intel.
But Qualcomm, Microsoft and others who license Arm technology argued the deal could hurt their businesses. That appealed to some regulators.
In its lawsuit to block the deal, the FTC alleged that Nvidia, which also licenses Arm technology, could limit access to that technology or manipulate the price other chip companies paid for the technology. Nvidia could also misuse confidential information companies have shared with Arm, the agency said.
Nvidia and Arm rejected those arguments. Mr. Huang has repeatedly insisted that Nvidia keep Arm’s business model. He also said the deal would bolster innovation, as Nvidia’s financial resources allowed Arm to develop more technology faster.
Nvidia has also proposed solutions to address regulator concerns. These include setting up a completely separate licensing entity, as well as licensing Nvidia-developed Arm-based intellectual property to all companies on a non-discriminatory basis.
“There is no evidence that a combined Nvidia and Arm would have the ability or incentive to harm competition,” attorneys for Nvidia, SoftBank and Arm argued in response to the FTC complaint.
Whoever prevailed in court, the long delays in closing the deal caused problems for Arm and SoftBank. SoftBank had paid $32 billion for Arm in 2016 as a daring gamble by the head, Masayoshi Son, on a global proliferation of Internet-connected devices, seeking to profit from the deal.
SoftBank now plans to make Arm public, said one of those with knowledge of the situation. Arm’s chief executive Simon Segars has decided to step down and will be succeeded by Rene Haas, another executive at the company, the person added.
The end of the deal is no surprise. Many Wall Street analysts had concluded after the FTC case that Arm had to make other plans. Last month, Bloomberg reported that Nvidia would likely abandon the effort; The Financial Times reported earlier on Monday that the transaction was cancelled.
“It feels safe to say that virtually no one in the investment community expected it to close anyway,” Stacy Rasgon, an analyst at Sanford C. Bernstein, wrote in a research note last month.
He suggested that Nvidia should be able to continue its recent momentum in the data center market. The company was also driven by strong demand for chips related to AI, video games, assisted driving and Bitcoin mining.
Arm first went public in 1998 and remained public until SoftBank’s acquisition. Pierre Ferragu, an analyst with New Street Research, wrote early this month that Arm should be able to make a successful IPO at a valuation in the order of $45 billion.