Tech Firm 24.3 Billion Takeover in Jeopardy

ByLouise Gates
Britan’s Most Valuable Tech Firm’s £24.3 Billion Takeover in Jeopardy
What seemed to be the biggest major takeover of a UK company since leaving the European Union by the Japanese internet firm Softbank Group has been placed into doubt. The deal for the largest tech firm in the UK, Arm Holdings for £24.3 billion (29 billion euros)  has been called into question by Softbank’s shareholders who are concerned about their company’s debt level.
 
The £24.3 Billion takeover of Arm Holdings which is Britain’s largest technology company, could be in doubt after investors in the Softbank Group lost confidence over the increasing debt within the company.
 
Softbank already have $113bn of debt and Mitsushige Akino, the chief fund manager at Ichiyoshi Asset Management, told Reuters. “It’s Mr Son’s style to keep expanding, but isn’t he stretching too much?” 
 
Atul Goyal, an analyst at Jefferies, added: “To us, the ARM acquisition announced yesterday [Monday 18th] appears largely inconsistent with SoftBank’s investment strategy. It does not inspire much confidence and requires deeper review.”
The takeover has given new British Prime Minister Theresa May a dilemma after only just one week of her new government. May and Chancellor Phillip Hammond have welcomed the deal with arms wide open believing it’s a sign international investors still want to plough money into Britain in the wake of Brexit. However critics claim Britain should not part with one of its very few world leading companies. ARM holdings design the chips that power more than 95% of smartphones throughout the world, and its technology effectively is the brains behind the iPhone.
 
Softbank’s boss, Masayoshi Son dismissed concerns from Softbank’s shareholders at a conference on Monday, and stated “If the investors do not like it, they will sell,” he said. “I am the largest shareholder in SoftBank. I share the same interest as the other shareholders.”
 

Later that day, during a conference call with investors, Son evoked Star Wars to try to persuade them to back his plan and invest in SoftBank. “If you listen to the force, this is the best company to invest in the debt,” he said.

The son owns 19% of SoftBank and has previously faced criticism about his deals before. In October 2012 the company revealed a $22bn plan to take over Sprint the US mobile phone network. Shares fell as heavily as they did on Tuesday, when they closed down 10.3% to ¥5,387 (£34.70), their lowest since March.

Northern Trust Capital Markets Analyst Neil Campling said Intel, Apple, Microsoft, Qualcomm and Google could emerge as rival bidders for ARM. “Softbank themselves did a poor job explaining the rationale on the conference call in our view and it seems to have been an opportunistic strike.”

“ARM is an awesome asset we think and, if they execute and keep the culture as promised then, in 10 years time it may look to be a masterstroke. But short term is a different matter.”

“The other thing is: there is no break-up fee, no lock in. ARM has opened the doors to a counter in our view. And the more we think about it the more likely and sensible it is for others to run the rule over this.”

SoftBank is offering a £17 a share for ARM. This is 43% higher than its last closing share price.

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