Graphic chip designer NVIDIA (NASDAQ: NVDA) is considering a purchase offer for processor architecture designer Arm, currently owned by Japanese telecommunications Softbank (OTC: SFTB.Y). Anonymous sources who spoke to Bloomberg and CNBC said NVIDIA has approached SoftBank with a proposal, although other buyers still have a chance to outperform NVIDIA.
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Two weeks ago, SoftBank hired Goldman Sachs (NYSE: GS) to help the company find a buyer for Arm. SoftBank has also discussed a possible deal with Apple (NASDAQ: AAPL)But SoftBank reportedly started those conversations and the iPhone maker wasn’t really interested in Arm’s technology licensing business.
Arm chips are found in almost every modern smartphone and tablet, and Arm-based chips are also making their way into cars and autonomous data center equipment. Both Apple and NVIDIA design and manufacture processors based on Arm system architectures.
It is unclear whether NVIDIA wants to take over the entire Arm operation or a smaller part of that business. If the talks don’t lead to a deal, SoftBank could simply divide Arm as a separate business. Anti-competitive concerns may compel SoftBank to choose the derivative solution, given Arm’s central role in the modern semiconductor industry. Any proposal from NVIDIA, Apple or other players in the technology sector would surely generate a whirlwind of complaints and demands.
Image source: Getty Images.
Whatever happens, SoftBank wants to save a generous sum of cash in exchange for Arm’s business. The Japanese company bought the British semiconductor specialist for $ 32 billion in 2016 and expects to make a profit on the next outing. The Philadelphia semiconductor index has nearly tripled in value during the SoftBank’s Arm ownership, so a $ 100 billion neighborhood deal would not be out of the question.
NVIDIA only had $ 16 billion in cash equivalents at the end of April, but the company could structure a broader deal around stock-swapping ideas and new debt. NVIDIA’s $ 257 billion market cap can do a lot of heavy lifting if SoftBank is ready to play.
