Softbank Shares Plunge On £24bn ARM Deal

Shares (Berlin: DI6.BE - news) in Japan's Softbank have fallen 10% after it agreed a controversial £24.3bn deal to buy UK microchip designer ARM Holdings (LSE: ARM.L - news) .

The purchase is Softbank's largest takeover to date and piles on more debt at the technology group, whose investments also include US telecoms operator Sprint and Chinese e-commerce giant Alibaba.

Chancellor Philip Hammond has welcomed the deal saying that despite the vote to leave the EU, Britain "has lost none of its allure to international investors".

But ARM co-founder Hermann Hauser said it represented a "sad day" for the UK's technology sector.

Shares in the Cambridge-based company - which designs microchips for iPhones - closed 41% higher on Monday, reflecting the premium Softbank is paying compared to ARM's closing value of £16.8bn at the close of trading last Friday.

But in Tokyo, investors in the Japanese firm gave the deal the thumbs down in Tuesday trading - with markets having been closed on Monday.

Analysts had been expecting that Softbank, which has raised nearly 2tn yen (£14bn) in cash through sales of some of its assets, was going to use some of that cash to reduce its debt or reward shareholders.

But it has now secured a 1tn yen (£7bn) bridge loan to finance part of its ARM purchase.

Experts have cautioned the takeover could lead to "brain drain" if ARM Holdings businesses were moved out of the UK.

But SoftBank has pledged to preserve ARM's existing management team, maintain its headquarters in Cambridge, at least double the number of employees in the UK over the next five years and increase its overseas workforce.

Masayoshi Son, chairman and chief executive of the Japanese firm, said: "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."

Mr Son he was not driven to invest in ARM because of Brexit.

"We did not use this as an opportunity to buy cheaper... Brexit did not bring us any discount," he said.