SoftBank Corp. of Japan—the majority owner of U.S. wireless carrier Sprint—surprised industry observers this week with a US$32 billion agreement to acquire ARM Holdings PLC, the UK-based designer of microprocessors that operate more than 95% of the world’s smartphones.
Announced Monday, the deal not only represents SoftBank’s largest corporate takeover to date but also confirms a shift in the company’s strategy towards investments in the Internet of Things (IoT). Apple, Inc. and Samsung Electronics are among the global smart phone producers that use microprocessors designed by ARM, and the company (which reported revenues of $1.5 billion last year) is said to be shifting its focus toward the design of chips that will power the IoT devices of the future. The pact, which comes in the wake of last month’s historic “Brexit” referendum in which UK citizens voted to leave the European Union, also constitutes the largest acquisition of a British company by an Asian firm to date. Immediately after SoftBank’s announcement, British government officials applauded the deal as one that demonstrates the continued confidence of foreign investors in the UK economy.
The all-cash deal is expected to be financed in part with $17 billion in funds that SoftBank raised through recent divestitures of stakes in Chinese Internet firm Alibaba and Supercell Oy, a Finnish mobile game developer. Predicting that ARM “will be at the center of the [IoT],” SoftBank CEO Masayoshi Son proclaimed that “IoT is going to be the biggest paradigm shift in human history [and] we have always invested at the beginning of every paradigm shift.”