Chip maker Nvidia said it is working closely with U.K. officials on the deal to buy microprocessor design house ARM.
Dreamstime
More than six months ago, Nvidia announced a deal to buy the UK-based microprocessor design house ARM from SoftBank Group for $40 billion. From the beginning, there were concerns that antitrust regulators in the U.K. might not like the deal, which involves the country’s largest and most influential technology business.
Some chip companies are concerned that the deal will give too much power to Nvidia (ticker: NVDA), given ARM’s traditional position as a neutral licensor of processor technology to many chip producers. ARM’s designs, for instance, are included in the vast majority of the world’s mobile phones.
And now those concerns have intensified: On Monday, the U.K. announced a national security review of the transaction. As the Wall Street Journal reporteds, U.K. Digital Secretary Oliver Dowden announced an investigation of the deal on national-security grounds, with a report on the proposal to be delivered by July 30. Dowden could approve the deal, block it, or set conditions for approval. The government had already announced plans to review the deal on antitrust grounds.
Nvidia contends the deal should not pose any national security concern; on Monday, a spokesperson for the company said the chip maker “will continue to work closely with the British authorities, as we have done since the announcement of this deal.”
Citi analyst Atif Malik wrote in a research note Monday that he now sees just a 10% chance that the proposed combination will be completed— down from a previous estimate of 25%.
“Based on this notice, it appears that the U.K. is pushing forward with a more stringent review of antitrust issues, including potential national security concerns,” he wrote.
Malik sees another complication in Nvidia’s recent announcement of plans to build an ARM-based microprocessor for data-center computers for the first time. His view is that the announcement was a positive for Nvidia but complicated the merger approval. For one thing, he wrote in a previous research note, it “shows what Nvidia can deliver with or without” a deal to actually buy Arm. And he said that the arrangement also could underline the perception that Nvidia could get more favorable treatment than other chip companies who license ARM designs.
Shares of Nvidia were down 1.7% to $604.11 in afternoon trading Tuesday.
Write to Eric J. Savitz at [email protected]
