US FTC sues to block Nvidia’s deal to buy Arm

FILE PHOTO: The logo of technology company Nvidia is seen at its headquarters in Santa Clara
FILE PHOTO: The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California, February 11, 2015. REUTERS / Robert Galbraith

December 3, 2021

By Stephen Nellis and David Shepardson

SAN FRANCISCO/WASHINGTON (Reuters) – The US Federal Trade Commission on Thursday filed a lawsuit to block a planned acquisition of more than $80 billion by US chip company Nvidia Corp, supplier of chip technology Arm UK, adding to the agreement’s significant global regulatory challenges.

The FTC said the proposed deal would give one of the largest chip companies control of the design and computer technology that rivals rely on to develop their own competing chips.

The deal is expected to fall apart after facing opposition in the chip industry. British regulators said last month they would launch an in-depth investigation into the deal and it is also being closely monitored by the European Union.

Arm licenses its chip architecture and blueprints to major chipmakers Apple Inc, Qualcomm Inc and Samsung Electronics Co Ltd, strengthening the global smartphone ecosystem. Arm was sold to Japan’s SoftBank in 2016.

Nvidia said it will “work to demonstrate that this transaction will benefit the industry and promote competition.”

Arm declined to comment.

The stock heavyweight deal has more than doubled in value since it was announced in September 2020 as Nvidia stock rallied on the back of its data center business. Nvidia will only owe $1.25 billion in parting fees if the deal doesn’t close and its shares closed up 2.2% at $321.26 on Thursday.

“Nobody thinks the deal is coming to an end,” said Stacy Rasgon, an analyst at Bernstein. “The data center story has really played out. The software narrative has become a bigger part of the story. I’d love to see this deal, but I don’t think they need it.”

In response to Nvidia’s offer, Softbank planned to file an initial public offering for Arm. While Arm’s revenue is skyrocketing, growing 56.3% to $1.46 billion in the six months ended September 30, it’s not clear if Arm, in an IPO, will make anything close. with the $80 billion value that Nvidia offers or not.

That would be a fresh blow to the Japanese conglomerate, whose Vision Fund assets tumbled by $10 billion last month, due to a sharp drop in valuations for its investments in Chinese e-commerce company Alibaba and its services. ride-hailing service Didi Global Inc.

The FTC, consisting of two Republicans and two Democrats, voted 4-0 to approve the challenge to the merger plan.


The FTC alleges that “the proposed merger would give Nvidia the ability and incentive to use control of this technology to undermine competitors, reduce competition, and ultimately lead to reduced product quality.” products, reduced innovation, higher prices and less choice, harming millions of Americans who benefit from Arm-based products. ”

The FTC added that the combined company “will have the means and incentives to prevent innovative next-generation technologies, including those used to run data centers and support systems.” the driver in the car.”

Several semiconductor firms such as MediaTek Inc and Broadcom Inc have voiced their support for the deal. But other companies like Qualcomm have opposed that out of concern that Nvidia will get a first look at the key technologies they depend on and then possibly have deeper insights into the products. in their future.

Qualcomm did not immediately respond to a request for comment.

Nvidia CEO Jensen Huang made an insightful comment during an industry dinner last month, saying that Qualcomm CEO Cristiano Amon, who recently took the helm of a trade group in the industry, has proven to be a masterful advocate in the fight against Arm. Qualcomm has had major battles of its own with global regulators, including the FTC, which Qualcomm prevailed after the regulator launched an antitrust lawsuit against it.

“He is the perfect person to support our industry,” Huang said from a stage as Amon sat in the stands. “I’m trying to figure out, how Cristiano knows every regulator on the planet, and by the time I got there to tell them my story on Arm, he was there supporting me. against it?” Huang said, to the stunned laughter from the crowd.

The FTC said it worked closely with staff from competition authorities in the European Union, the United Kingdom, Japan and South Korea.

(Reporting by Stephen Nellis in San Francisco, David Shepardson and Diane Bartz in Washington and Kanishka Singh in Bengaluru Editing by Rosalba O’Brien, Peter Henderson and Matthew Lewis) US FTC sues to block Nvidia’s deal to buy Arm

Bobby Allyn

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