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July 18, 2016, 8:11 a.m. EDT

SoftBank to buy ARM Holdings for more than $32B

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By Rick Carew

HONG KONG--U.K.-based chip designer ARM Holdings PLC confirmed Monday that it agreed to a buyout offer worth more than $32 billion from SoftBank Group Corp., marking a significant push for the Japanese telecommunications giant into the mobile internet.

The all-cash deal comes on the heels of SoftBank Chief Executive Masayoshi Son's decision to take back the reins of the company's investment strategy from his former deputy and designated successor, Nikesh Arora, who resigned in June.

"ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the 'Internet of Things,'" Mr. Son said. "This is one of the most important acquisitions we have ever made, and I expect ARM to be a key pillar of SoftBank's growth strategy going forward," he said. ARM's shares rose as much as 45% in Monday morning trading in London.

The Japanese company said it would double employee head count in the region over the next five years. It also plans to increase head count outside the U.K.

SoftBank, an internet and telecommunications conglomerate that invests in online startups from India to China and owns mobile carriers in Japan and the U.S., has been raising cash in recent months to bolster its war chest and pay down debt. Big deals have included the sale of around $10 billion worth of shares in Chinese e-commerce giant Alibaba Group Holding Ltd. and the sale of its entire stake in Finnish game maker Supercell Oy to China's Tencent Holdings Ltd. That deal valued Supercell at more than $10 billion, and is expected to bring in more than $7 billion for SoftBank.

The ARM deal also comes less than a month after the U.K.'s decision to exit the European Union, a move that pushed down the value of the pound. That has made British companies potentially more attractive for buyers from overseas. But it also comes after a rally in ARM shares after the June 23 vote. ARM has very little sales in Britain itself.

In a press conference Monday in London, Mr. Son said he wasn't affected by Brexit considerations and had only met ARM's chairman for the first time two weeks ago--and after the Brexit vote.

Brexit "didn't affect my decision" on pursuing ARM, he said. He said the recent drop in the pound after Britain's referendum last month "did not bring us any discount."

Philip Hammond, Britain's Treasury chief, said early Monday he welcomed the deal in a statement. Mr. Son said he told Mr. Hammond that he would keep ARM based in England. About 1,600 of ARM's 4,000-employee force is based in the U.K. Mr. Son said he pledged to British officials that he would double ARM's U.K.-based workforce over the next five years.

Cambridge, U.K.-based ARM, whose microchip designs dominate the global processor market for smartphones including Apple Inc.'s iPhone, boasts a strong portfolio of intellectual property for chips connecting mobile devices. While less vibrant demand for smartphones has weighed on ARM's recent results, SoftBank is betting that its technology will be crucial to connecting devices ranging from smartphones to automobiles and appliances, according to a person familiar with the matter.

SoftBank also controls Sprint Corp. and has been cutting expenses to revive the No. 4 U.S. mobile carrier.

SoftBank started more than three decades ago as a software distributor and has undergone many metamorphoses since then. At one time, it owned a magazine publisher and operated trade shows. In the 2000s, Mr. Son used a series of acquisitions to turn SoftBank into one of Japan's three major telecommunications companies, and its Japanese mobile-phone operator remains the company's cash cow.

He added to his telecommunications holdings by taking a controlling stake in Sprint of the U.S., then veered into internet services with investments in Asian e-commerce companies and ride-sharing apps.

Peter Landers in Tokyo contributed to this article.

Write to Rick Carew at rick.carew@wsj.com and Ian Walker at ian.walker@wsj.com

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