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$40bn Arm takeover in doubt amid mounting Nvidia gloom

nvidia arm
nvidia arm

The US chipmaker Nvidia is losing hope of completing the $40bn (£30bn) takeover of Britain’s Arm as its regulatory woes mount, leaving it facing a significant break fee.

Nvidia executives are understood to have become increasingly gloomy about the prospects of the takeover, which is yet to be cleared by a single regulator 16 months after the deal was announced.

Watchdogs in China have only recently started to formally review the deal, while a US government legal challenge seeking to block the sale is not due to begin until August – a month before the two-year deadline on the deal expires.

China is a major market for Arm, which also has a joint venture in the country, giving regulators there the right to review the deal. In 2018, microchip company Qualcomm abandoned a $44bn deal for Dutch counterpart NXP after Chinese authorities refused to approve it in time.

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In the UK, the Competition and Markets Authority (CMA) is investigating the sale on national security grounds, while European officials are believed to be weighing up a set of objections to the sale.

Nvidia shares fell 4pc on Tuesday after Bloomberg reported that the company had privately told partners it does not expect the deal to go ahead.

It said that SoftBank, Arm’s Japanese owners, were stepping up plans to float the company, which is seen as the most likely alternative if its sale to Nvidia falls through.

Nvidia would lose a $1.25bn deposit it has paid SoftBank if the deal is blocked or fails to pass before a September deadline for it to go through.

The deal would be the biggest in the semiconductor industry if passed, but has faced vocal opposition from parts of the sector, who say it would threaten Arm’s reputation for independence.

Arm, based in Cambridge, designs microchip technology that features in smartphones, laptops and billions of internet-of-things devices.

An Nvidia spokesman said: "We continue to hold the views expressed in detail in our latest regulatory filings – that this transaction provides an opportunity to accelerate Arm and boost competition and innovation.”

A spokesman for SoftBank said: “We remain hopeful that the transaction will be approved.”

The prospect of Arm being floated instead of sold could kick off a battle between London, where the company was listed before its £24bn sale to SoftBank in 2016, and New York, where investors are traditionally seen as giving higher valuations to technology companies.

Nvidia told the CMA earlier this month that critics of the deal are seeking to “romanticise” the company’s past and that blocking it would hit investment in the UK.