Japanese pledge to double ARM UK staff after $31bn acquisition
SoftBank Group of Japan has promised to fund ongoing growth of ARM’s Cambridge HQ and double UK headcount in the next five years after the boards agreed a $31 billion (£24.3bn) cash takeover.
The acquisition now has to win court and shareholder approval – expected to be formalities, although it may be Q3 before the deal is completely done and dusted. SoftBank intends to delist ARM from the London and New York markets once the deal is ratified. The acquisition promises a multi-million dollar windfall for senior ARM directors who are significant shareholders.
It is the biggest transaction in the history of Cambridge – and European – technology.
The Japanese group says it is buying into Cambridge’s world-leading technology capabilities and will leave ARM as a stand-alone business within the group, run by the existing management teams, led by CEO Simon Segar.
Cambridge serial entrepreneur and investor Sherry Coutu is predicting that this might prove the first of many such post-Brexit swoops by global giants for Cambridge and UK businesses.
The yen and dollar – the currencies of the leading tech market players – have strengthened against sterling post-Brexit, Coutu points out. She also believes there is a micro-economic mission as Cambridge talent and innovation continues to excite global market leaders.
SoftBank, which invests in key areas of technology, says ARM can lead the world in realising the full potential of the Internet of Things.
For that reason it is paying ARM shareholders 1,700p per share – a premium of around 43 per cent to Friday’s closing price of 1,189p. ARM shareholders on the register of members as at close of business on September 8, 2016, will also be entitled to an interim dividend of 3.78p per share to be paid on October 10 – a move likely to spark a fresh stampede for stock on both sides of the Atlantic in the coming weeks.
Masayoshi Son, chairman and CEO of SoftBank, said ARM headcount outside the UK would also be scaled significantly: “We have long admired ARM as a world renowned and highly respected technology company that is by some distance the market-leader in its field.
“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.
“This investment also marks our strong commitment to the UK and the competitive advantage provided by the deep pool of science and technology talent in Cambridge.
“As an integral part of the transaction, we intend to at least double the number of employees employed by ARM in the UK over the next five years. SoftBank intends to invest in ARM, support its management team, accelerate its strategy and allow it to fully realise its potential beyond what is possible as a publicly listed company.
“It is also intended that ARM will remain an independent business within SoftBank and continue to be headquartered in Cambridge, UK. 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.”
ARM chairman Stuart Chambers added: “It is the view of the Board that this is a compelling offer for ARM Shareholders, which secures the delivery of future value today and in cash.
“The board is reassured that ARM will remain a very significant UK business and will continue to play a key role in the development of new technology. SoftBank has given assurances that it will invest considerably in the business, including doubling the UK headcount over the next five years and maintaining ARM's unique culture and business model.
“ARM is an outstanding company with an exceptional track record of growth. The board believes that by accessing all the resources that SoftBank has to offer, ARM will be able to further accelerate the use of ARM-based technology wherever computing happens.”
ARM celebrated its silver jubilee last November, having been founded in 1990. Its technology is embedded in more than 95 per cent of smart phones and over 30 per cent of all chips with processors sold worldwide in 2015. Over 85 billion systems-on-chip have been shipped to date based on ARM's technology.
ARM’s board noted that the terms of the acquisition imply an enterprise value multiple of approximately 24.4 times the company’s revenue for the year ending December 31, 2015 of £968.3 million and an equity value multiple of approximately 56.8 times adjusted profit after tax for the year of £428.9m.
Founded in 1981, SoftBank is one of the leading operators and investors in the global technology, Internet and wireless sectors. Its operating businesses consist of market leading companies in the advanced telecoms and consumer Internet sectors, including SoftBank Telecom, Sprint Corporation and Yahoo! Japan, as well as growing initiatives in robotics, clean energy and other emerging, technology-based industries. It is listed on the Tokyo Stock Exchange with a market capitalisation of JPY 6.9 trillion (£49.4bn). Headquartered in Tokyo, it has over 63,000 employees.
ARM is Cambridge’s greatest ever technology business and employs more than 4,000 people worldwide; it is in the process of building a new Cambridge headquarters. ARM was spun out of the iconic Acorn and supplies chips to all the world’s leading tech innovators, including Samsung, Apple and Huawei – all three of whom now have a Cambridge presence following acquisitions of their own.
The company has been tracked by US tech giants and arch rival Intel, as well as Apple, were believed to be interested.
Japan has a strong track record in building Cambridge businesses following acquisition. Brother Industries recently completed the integration of Cambridge inkjet printing company Domino; Toshiba has been a long-term investor in University IP and in life sciences, Takeda and Sosei have strong interests in the cluster.