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Jan. 6, 2021, 3:48 p.m. EST

Nvidia’s $40 billion takeover of Arm to be investigated by U.K. competition regulator

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By Jack Denton

The U.K. competition regulator said on Wednesday that it would investigate Nvidia’s $40 billion takeover of Arm, the largest-ever deal in the semiconductor industry, which would make Nvidia a strong competitor against Intel and AMD /zigman2/quotes/208144392/composite AMD +0.99% .

The Competition and Markets Authority, or CMA, said that interested third parties had until Jan. 27 to comment on the impact that the acquisition would have on competition in the U.K., ahead of a formal investigation starting later this year.

Shares in Nvidia /zigman2/quotes/200467500/composite NVDA +0.74% were down more than 2.4% shortly after the opening of trading in New York.

Santa Clara, Calif.-based graphics chip giant Nvidia announced in September 2020 that it had reached a cash-and-stock deal to buy Arm, based in Cambridge, U.K., from the Japanese technology conglomerate SoftBank /zigman2/quotes/207303954/delayed JP:9984 +0.05% .

The deal has drawn criticism in the U.K., with shareholders, politicians, and industry experts citing concerns over national security and losing critical homegrown technology and jobs to a foreign buyer.

Critics have also warned that Nvidia, which in July 2020 overtook Intel /zigman2/quotes/203649727/composite INTC +4.13% as the world’s most valuable chip maker, would become too dominant if the Arm acquisition is approved.

Essential reading: Pressure grows for U.K. to intervene in Nvidia’s $40 billion Arm takeover

Plus: 2 significant times the U.K. government intervened in takeovers

The CMA said that its investigation will likely consider whether, under Nvidia’s ownership, Arm would have an incentive to withdraw, raise prices, or reduce the quality of its intellectual licensing services to Nvidia’s rivals.

Arm develops chip designs and licenses them to companies including Apple /zigman2/quotes/202934861/composite AAPL +1.07% , Amazon /zigman2/quotes/210331248/composite AMZN +0.77% , Samsung /zigman2/quotes/209800866/delayed KR:005930 -0.36% , and Qualcomm /zigman2/quotes/206679220/composite QCOM +1.53% , which use Arm’s chips to power mobile device processors globally.

“The chip technology industry is worth billions and critical to many of the products that we use most in our everyday lives,” said CMA Chief Executive Andrea Coscelli.

“We will work closely with other competition authorities around the world to carefully consider the impact of the deal and ensure that it doesn’t ultimately result in consumers facing more expensive or lower quality products,” Coscelli said.

Read this opinion: Nvidia’s deal with Arm paves the path to a trillion-dollar market value

And this opinion: Nvidia’s deal for Arm could mean a real challenge to Intel and AMD, but is likely to face opposition

The CMA’s mandate is focused on competition, leaving the U.K. government responsible for any intervention based on national security or jobs grounds. The government said in September 2020 that it was assessing the deal, including commitments to retain British staff.

Nvidia has said that it would keep Arm’s headquarters in Cambridge and expand its research and development presence there, including building an artificial-intelligence and education center.

When SoftBank bought Arm in 2016, it made legally-binding assurances on the Cambridge headquarters and jobs enforceable by the U.K.’s Takeover Panel, which governs mergers and acquisitions in the country. It is unclear whether Nvidia would inherit these commitments. The agreements will also expire in September 2021, leaving Nvidia to decide the company’s future unless the British government intervenes.

Arm employs around 6,500 people globally, of which 3,000 are in the U.K., with 2,500 in Cambridge.

Alongside approval from the CMA, regulators from the U.S., China, and the European Union, as well as other countries, will need to clear Nvidia’s takeover.

“As we have said, we believe the approval process will take about 18 months from when we signed the deal,” Emilia Beisswenger, a spokesperson for Nvidia, told MarketWatch. “The regulatory process is confidential and we won’t be providing comment on milestones along the way.”

/zigman2/quotes/208144392/composite
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$ 78.52
+0.77 +0.99%
Volume: 58.55M
March 5, 2021 4:00p
P/E Ratio
38.60
Dividend Yield
N/A
Market Cap
$94.18 billion
Rev. per Employee
$774,841
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/zigman2/quotes/200467500/composite
US : U.S.: Nasdaq
$ 498.46
+3.65 +0.74%
Volume: 13.57M
March 5, 2021 4:00p
P/E Ratio
72.27
Dividend Yield
0.13%
Market Cap
$306.78 billion
Rev. per Employee
$878,788
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/zigman2/quotes/207303954/delayed
JP : Japan: Tokyo
¥ 10,055.00
+5.00 +0.05%
Volume: 17.65M
March 5, 2021 3:00p
P/E Ratio
13.01
Dividend Yield
0.00%
Market Cap
¥18106.53 billion
Rev. per Employee
¥76.45M
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/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 60.74
+2.41 +4.13%
Volume: 39.51M
March 5, 2021 4:00p
P/E Ratio
12.29
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2.29%
Market Cap
$236.94 billion
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$704,042
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US : U.S.: Nasdaq
$ 121.42
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Volume: 153.77M
March 5, 2021 4:00p
P/E Ratio
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0.68%
Market Cap
$2016.75 billion
Rev. per Employee
$1.86M
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US : U.S.: Nasdaq
$ 3,000.46
+22.89 +0.77%
Volume: 5.39M
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P/E Ratio
71.86
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N/A
Market Cap
$1499.40 billion
Rev. per Employee
$297,430
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/zigman2/quotes/209800866/delayed
KR : S. Korea: KRX
82,100.00
-300.00 -0.36%
Volume: 20.51M
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P/E Ratio
21.37
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₩552063.16 billion
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US : U.S.: Nasdaq
$ 129.75
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March 5, 2021 4:00p
P/E Ratio
22.18
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2.00%
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$145.18 billion
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$573,927
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