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Nvidia to buy Arm in $40bn deal

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Graphics processing unit maker Nvidia and SoftBank Group (SBG) have announced a definitive agreement under which Nvidia will acquire UK chipmaker Arm Limited from SBG and the SoftBank Vision Fund in a transaction valued at $40 billion.

In a statement, Nvidia says the transaction is expected to be immediately accretive to Nvidia’s non-GAAP gross margin and non-GAAP earnings per share.

It adds that the combination brings together Nvidia’s artificial intelligence (AI) computing platform with Arm’s vast ecosystem to create the premier computing company for the age of AI, accelerating innovation while expanding into large, high-growth markets.

SoftBank will remain committed to Arm’s long-term success through its ownership stake in Nvidia, expected to be under 10%.

“AI is the most powerful technology force of our time and has launched a new wave of computing,” says Jensen Huang, founder and CEO of Nvidia.

“In the years ahead, trillions of computers running AI will create a new Internet of things (IOT) that is thousands of times larger than today’s Internet of people. Our combination will create a company fabulously positioned for the age of AI.

“Simon Segars [CEO of Arm] and his team at Arm have built an extraordinary company that is contributing to nearly every technology market in the world. Uniting Nvidia’s AI computing capabilities with the vast ecosystem of Arm’s CPU [central processing unit], we can advance computing from the cloud, smartphones, PCs, self-driving cars and robotics, to edge IOT, and expand AI computing to every corner of the globe.

“This combination has tremendous benefits for both companies, our customers, and the industry. For Arm’s ecosystem, the combination will turbocharge Arm’s R&D capacity and expand its IP portfolio with Nvidia’s world-leading GPU and AI technology.

“Arm will remain headquartered in Cambridge. We will expand on this great site and build a world-class AI research facility, supporting developments in healthcare, life sciences, robotics, self-driving cars and other fields. And, to attract researchers and scientists from the UK and around the world to conduct ground-breaking work, Nvidia will build a state-of-the-art AI supercomputer, powered by Arm CPUs. Arm Cambridge will be a world-class technology centre.”

“Nvidia is the perfect partner for Arm,” says Masayoshi Son, chairman and CEO of SBG. “Since acquiring Arm, we have honoured our commitments and invested heavily in people, technology and R&D, thereby expanding the business into new areas with high growth potential.”

“Arm and Nvidia share a vision and passion that ubiquitous, energy-efficient computing will help address the world’s most pressing issues, from climate change to healthcare, from agriculture to education,” says Simon Segars, CEO of Arm.

“Delivering on this vision requires new approaches to hardware and software and a long-term commitment to research and development. By bringing together the technical strengths of our two companies, we can accelerate our progress and create new solutions that will enable a global ecosystem of innovators. My management team and I are excited to be joining Nvidia so we can write this next chapter together.”

Under the terms of the transaction, which has been approved by the boards of directors of Nvidia, SBG and Arm, Nvidia will pay to SoftBank a total of $21.5 billion in Nvidia common stock and $12 billion in cash, which includes $2 billion payable at signing.

The number of Nvidia shares to be issued at closing is 44.3 million, determined using the average closing price of Nvidia common stock for the last 30 trading days. Additionally, SoftBank may receive up to $5 billion in cash or common stock under an earn-out construct, subject to satisfaction of specific financial performance targets by Arm.

Nvidia will also issue $1.5 billion in equity to Arm employees.

Nvidia intends to finance the cash portion of the transaction with balance sheet cash. The transaction does not include Arm’s IOT Services Group.

The proposed transaction is subject to customary closing conditions, including the receipt of regulatory approvals for the UK, China, the European Union and the US.

Completion of the transaction is expected to take place in approximately 18 months.

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