Rationale for the merger
As we saw in the first part of this series, Japanese tech company Softbank is buying United Kingdom semiconductor IP firm ARM Holdings (ARMH) for 1,700 pence per share in cash. This price works out to be a $30 billion enterprise value. ARM has very little debt.
This deal is about increasing Softbank’s growth to position it as a leader in Internet of Things. The press release made no comments on synergies or the impact on Softbank’s earnings per share. This looks to be a bolt-on acquisition without much in the way of synergy potential.
Softbank CEO Masayoshi Son 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. ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the ‘Internet of Things.'”
“This investment also marks our strong commitment to the UK and the competitive advantage provided by the deep pool of science and technology talent in Cambridge. As an integral part of the transaction, we intend to at least double the number of employees employed by ARM in the UK over the next five years.”
“SoftBank intends to invest in ARM, support its management team, accelerate its strategy and allow it to fully realize its potential beyond what is possible as a publicly listed company. It is also intended that ARM will remain an independent business within SoftBank, and continue to be headquartered in Cambridge, UK.”
“This is one of the most important acquisitions we have ever made, and I expect ARM to be a key pillar of SoftBank’s growth strategy going forward.”
Merger arbitrage resources
Other important merger spreads include the deal between Cigna (CI) and Anthem (ANTM) and KLA-Tencor (KLAC) and Lam Research (LRCX). For a primer on risk arbitrage investing, read Merger Arbitrage Must-Knows: A Key Guide for Investors.
Investors who are interested in trading in the tech sector can look at the iShares Global Technology ETF (IXN).