A British chip designer that supplies components for nearly all of the world’s smartphones looks set to be swallowed in a bumper £24 billion deal that could spark further takeover activity in the wake of the Brexit vote.
Japan’s SoftBank has promised to double the number of UK staff at Arm Holdings after reaching a deal to buy the Cambridge-based firm, which supplies technology for Apple’s iPhone and Samsung’s Galaxy devices.
The acquisition – agreed by both companies’ boards – has seen shares in Arm valued at 1,700p, with the company being priced at about £24.3bn.
Analysts have been forecasting an increase in inbound merger and acquisition (M&A) activity following Britain’s decision to leave the European Union and the subsequent slump in the value of sterling, making UK-listed businesses more attractive to potential overseas buyers.
Neil Wilson, markets analyst at ETX Capital, said: “We can see in this deal the effect of Brexit and the collapse in the pound as British companies become ripe takeover targets. The pound is down around 10 per cent since the referendum and this makes British firms a lot more attractive.
“Poundland was recently snapped up by Steinhoff and if this Arm deal is anything to go by, we can expect a torrent of deals to flow.”
He added: “Fears that Brexit would kill off deals in the UK seems to have been overblown – Britain is very much open for business and the weak pound is key. A lot more British firms could become foreign-owned quite soon.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “While it’s difficult to chalk this deal up to the Brexit vote, the falling pound does make some UK companies cheaper, and this takeover could act as the starting gun for more M&A activity.”
Arm, which employs more than 4,000 people globally, saw rising profits in April as it outpaced the market thanks to strong demand for its products.
The combined business hopes the merger will allow it to capitalise on opportunities in the “internet of things” – giving every day objects a connection to the internet. SoftBank said it intends to continue a partnership-based business model and that a doubling of the UK workforce will allow Arm to continue to develop leading-edge technology in the UK.
The chip design sector has undergone a period of consolidation, including the 2014 takeover of Edinburgh-based Wolfson Microelectronics by US firm Cirrus Logic.
Chancellor Philip Hammond said the £24bn investment “would be the largest ever from Asia into the UK”.
He added: “It would guarantee to double the number of jobs in Arm in the UK over the next five years and turn this great British company into a global phenomenon.
“Just three weeks after the referendum decision, it shows that Britain has lost none of its allure to international investors. Britain is open for business - and open to foreign investment.
“Softbank’s decision confirms that Britain remains one of the most attractive destinations globally for investors to create jobs and wealth. And as Arm’s founders will testify, this is the greatest place in the world to start and grow a technology business.”