The UK is considering blocking
$40 billion acquisition of chip designer Arm due to potential national security risks, according to a report on Tuesday.
The report doesn’t seem to have hurt
the stock, which rose Tuesday and rose close to 1.5% on Wednesday.
The back story. Owned by Japanese investor
since 2016, Arm has licensed intellectual property to include:
who use the chip designs in device processors worldwide. The company’s purchase by Nvidia, announced in September 2020, is a step to transform the global semiconductor landscape, as the importance of chips has been underlined by a global shortage.
But the deal has been under scrutiny in the UK since its announcement in September. British companies from defense to semiconductors have recently become targets for acquisitions, and there is political pressure to protect national control over critical industries. For his part, Nvidia has committed to, among other things, retain Arm’s UK headquarters in Cambridge and expand its research and development presence.
Also read: Nvidia’s $40 Billion Acquisition of Arm Faces UK National Security Probe
What’s new. The UK Competition and Markets Authority was tasked in April to assess concerns surrounding the deal, including potential competition concerns and third-party security concerns.
The regulator’s report, delivered at the end of July, contains worrying implications for national security, and the UK is currently leaning towards rejecting the takeover, Bloomberg News reported Tuesday. At the very least, a deeper investigation into the merger on security issues is likely, the report said.
Looking forward. Evidence that the UK is leaning towards blocking the deal could cause stress for Nvidia investors. And for good reason, as the acquisition of Arm is crucial for Nvidia to increase its dominance in the global chip industry.
Ultimately, the UK government is under a lot of pressure to send a message that it will not put its critical industries in the possession of foreign investors. The largest chip maker in the country,
Newport Wafer Fab,
is the subject of a takeover bid by the Chinese Nexperia, and this week the American group
agreed to buy UK aerospace and defense engineer
Not to mention the wave of private equity takeovers in sectors from retail (grocery Morrisons) to infrastructure (John Laing Group).
Will the UK really block any of these deals? Maybe. This would satisfy some of the domestic pressure and send a signal that not all foreign acquisitions will get the green light. But making an example of Nvidia might be a bridge too far: $40 billion too far.
Write to Jack Denton at email@example.com