SoftBank's $40 bn sale of chip group Arm to Nvidia collapses
Japan's SoftBank confirmed Tuesday that the $40 billion sale of chip business Arm to Nvidia had collapsed because of "significant regulatory challenges" over concerns about competitiveness, and said it planned to now take the unit public.
The decision comes after US authorities filed a lawsuit seeking to block the sale and probes were launched into the deal in the United Kingdom and Europe.
Alongside the announcement, the telecoms firm-turned-investment giant reported a net profit of 29.0 billion yen ($251 million) in the third quarter.
It marks a sharp drop from the 1.17 trillion yen profit logged in the same period in the previous financial year, when results were boosted by huge tech-share rallies.
With a focus on debt to drive growth, technology firms of the kind CEO Masayoshi Son has heavily invested in have taken a beating in recent months on the expectation of higher US interest rates.
These routs led to SoftBank's first quarterly net loss for 18 months during the previous three months.
And there have been challenges elsewhere for SoftBank, including losses on Chinese ride-hailing giant Didi Chuxing, which has been hit by Beijing's regulatory crackdown.
Didi Chuxing has been forced to delist from the New York stock exchange and reported a $4.7 billion net loss in the October-December period.
Chinese giant Alibaba Group, which is SoftBank's biggest single investment, has also tumbled in recent months and reports have suggested Son may be considering the sale of some of his stake in the firm.
Son, who has poured money into some of the tech world's biggest names and hottest new ventures, said in November that Softbank was "in the middle of a blizzard".
"That 'blizzard' probably has room to run, as the usual buy-the-dip mentality that boosted tech over the last two years is less visible," said Kirk Boodry, an analyst at Redex Research who publishes on Smartkarma.
- 'Not a good time' -
Hideki Yasuda, a senior analyst at Ace Research Institute, was more blunt, telling AFP: "As SoftBank Group is now an investment fund... its earnings are heavily influenced by the state of the stock market.
"Now is not a good time for SoftBank Group."
He singled out the slump in Alibaba shares as particularly damaging for Son, whose strategy of targeting tech firms and start-ups in search of unicorns has been controversial and led to an earnings rollercoaster in recent years.
In November, Son announced a share buyback worth one trillion yen (then $8.8 billion), reportedly under pressure from shareholders frustrated by SoftBank's sinking stock price.
But it may now find itself with less cash on hand than anticipated, with analysts predicting that an Arm IPO -- which SoftBank said it wanted by March 2023 -- would bring in less than the planned sale.
Nvidia is one of the world's largest and most valuable computing companies, while Arm creates and licenses microprocessor designs and architectures.
SoftBank had announced the deal in 2020, when it was valued at $40 billion, though the sum would have been higher now thanks to a rise in Nvida's share price.
The Financial Times, which reported the deal's collapse earlier Tuesday, said SoftBank was expected to seek to list Arm in the United States, but that could face opposition in Britain.
SoftBank said its consolidated net profit for the nine months to December 2021 plunged 87 percent on-year to 392.6 billion yen.
The group's investments in volatile tech firms and start-ups have made for unpredictable earnings.
In 2019-20, it reported a record net loss as the start of the pandemic compounded woes caused by its investment in troubled office-sharing start-up WeWork.
But it then reported Japan's biggest-ever annual net profit in 2020-21, as people moved their lives online during the coronavirus pandemic.
The company has also seen internal turbulence recently, with its chief operating officer Marcelo Claure leaving last month, following reports that his demands for as much as $1 billion in compensation had fuelled an internal clash.