Nvidia Drops After Shelving Arm Deal, Forfeits $1.25 Billion to Softbank

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Nvidia Drops After Shelving Arm Deal, Forfeits $1.25 Billion to Softbank

By Dhirendra Tripathi

Investing.com – Nvidia stock (NASDAQ: NVDA ) traded 0.6% lower in premarket Tuesday after the company shelved plans to buy Softbank's (T: 9984 ) stake in chip designer ARM.

The purchase would have handed Nvidia a prized asset at a time when capabilities related to chip designing and manufacturing are rare. ARM offers its designs to more than 500 companies that make their own chips.

The Japanese investor consented to the termination and will retain the $1.25 billion prepaid by Nvidia, which will be recorded as profit in the fourth quarter. The chipmaker retains its 20-year ARM license.

“The parties agreed to terminate the agreement because of significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties,” Nvidia said in a press release. ARM will now start preparations for a public offering within the year that ends March 2023, Softbank said in the same release. Its stock closed 0.9% higher in Tokyo trading. The investing giant holds about 25% of the U.K.-based company in its Vision Fund 1.

Nvidia had in September 2020 set an 18-month deadline to complete the takeover. The U.S. Federal Trade Commission sued to stop the transaction in December, arguing that Nvidia would become too powerful if it gained control over ARM’s chip designs.

The U.K.'s Competition and Markets Authority, the regulator in ARM's home country, also opposed the deal. Approval was needed in China too where ARM has a joint venture with private equity firm Hopu Investments. There was no word from the authorities there.

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