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Boris Johnson urged to intervene on Nvidia's $40bn ARM takeover

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·4-min read
A logo sign outside an office building occupied by ARM Holdings plc, in San Jose, California on December 7, 2014. Photo Credit: Kristoffer Tripplaar/ Sipa USA *** Please Use Credit from Credit Field ***
A logo sign outside an office building occupied by ARM Holdings plc, in San Jose, California on December 7, 2014. Photo: Kristoffer Tripplaar/Sipa USA/PA

The co-founder of British microchip designer ARM Holdings has written an open letter to the UK Prime Minister urging him to intervene in the planned $40bn (£31.1bn) sale of ARM to US firm Nvidia.

A spokesperson for the UK government said it was monitoring the deal “closely” and “would not hesitate to investigate further and take appropriate action” if it decided it was appropriate.

American chipmaker Nvidia (NVDA) announced overnight it had struck a deal with Japan’s SoftBank (9984.T) to buy Cambridge-based ARM Holdings for $40bn. ARM designs microchips that are used in everything from smartphones to internet-connected fridges.

Nvidia founder and chief executive Jensen Huang said the takeover would “create a company fabulously positioned for the age of AI” and have “tremendous benefits for both companies, our customers, and the industry.”

Shares in Nvidia rose over 5% in pre-market trade in New York. SoftBank shares gained 8.9% in Tokyo on Monday. The Japanese company will take a stake of “under 10%” in Nvidia as part of the deal.

NVIDIA CEO Jen-Hsun Huang shows NEW HGX with TESLA V100 VERSA GPU CLOUD COMPUTING as he talks about AI and gaming during the Computex Taipei exhibition at the world trade center in Taipei, Taiwan, Tuesday, May 30, 2017. (AP Photo/Chiang Ying-ying)
NVIDIA CEO Jen-Hsun Huang. Photo: AP Photo/Chiang Ying-ying

However, the announcement on Sunday evening met with almost immediate backlash in Britain.

Hermann Hauser, who helped found ARM in 1990, said in an open letter to the UK Prime Minister he was “extremely concerned” about the deal.

Hauser said he and many others were concerned that the UK would lose jobs and influence and argued ARM’s business model would be compromised.

“Surrendering UK’s most powerful trade weapon to the US is making Britain a US vassal state,” Hauser wrote in the open letter, which was published on Monday.

He called on Boris Johnson to force Nvidia to sign legally binding terms agreeing to preserve UK jobs, maintain ARM’s market neutrality, and secure exemptions from US rules that would ban ARM from dealing with China.

If the UK government can’t secure these commitments, Hauser said it should support an IPO of ARM on the London Stock Exchange. The company was previously part of the FTSE 100 before SoftBank purchased it for $32bn in 2016.

“If you do not act on this transaction in the national interest, history will remember you not as the person who took Britain out of Europe but the person who delivered Britain into American vassalage,” Hauser wrote.

He urged others to sign the open letter calling for action.

Hermann Hauser on April 18, 2018 in Cambridge, England. (Photo by Chris Williamson/Getty Images)
Hermann Hauser on April 18, 2018 in Cambridge, England. Photo: Chris Williamson/Getty Images

Earlier in the day, Hauser had said the deal was “a disaster for Cambridge, the UK and Europe” in an interview with Reuters.

A spokesperson for the government told Yahoo Finance UK in an emailed statement: “ARM is an important part of the UK's tech sector and makes a significant contribution to the UK economy.

“While acquisitions are primarily a commercial matter for the parties concerned, the Government monitors these closely and when a takeover may have a significant impact on the UK we will not hesitate to investigate further and take appropriate action.”

The UK government could order a review of the takeover by the Competition and Markets Authority under the 2002 Enterprise Act.

“The agreement isn’t cast iron yet,” said Nicholas Hyett, a equity analyst at Hargreaves Lansdown.

“Prior to its 2016 acquisition by Softbank, ARM was seen as one of the UK’s technological jewels, and approving its sale to an overseas buyer was politically sensitive.

“That’s probably more the case now than ever – and with Softbank’s official commitments to Arm’s Cambridge site due to expire in 2021 the deal may well come with additional strings attached from the UK government.”

READ MORE: SoftBank closes in on £31bn deal with Nvidia for UK’s ARM Holdings

Hauser and Tudor Brown, another ARM cofounder, have been outspoken critics of the sale to Nvidia, which has been trailed in the press for some time.

“It will become one of the Nvidia divisions, and all the decisions will be made in America, no longer in Cambridge,” Hauser told the BBC in early August.

On Sunday, Huang said ARM would remain headquartered in Cambridge and promised to expand R&D facilities there.

“Arm Cambridge will be a world-class technology center,” he said.

Nvidia also pledged to keep ARM’s open operating model, meaning customers would not be obliged to buy ARM-designed chips that are manufactured by Nvidia.

However, Hauser said any commitments must “be legally binding or they are useless.”