SoftBank Group Corp is reportedly engaging in discussions to acquire the 25% stake in Arm Ltd that it does not directly possess from its Vision Fund 1 (VF1). This move, if successful, could deliver a substantial win for investors who have patiently awaited promising returns for several years. Insiders familiar with the matter revealed that these negotiations are transpiring as SoftBank, the current owner of a 75% stake in Arm, prepares to list the chip designer on Nasdaq next month at a valuation ranging between $60 billion and $70 billion.
Potential Windfall for VF1 Investors
Should these talks culminate in an agreement, the Japanese tech conglomerate could potentially furnish VF1 investors, including Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala, with a notable immediate windfall. This development would hold particular significance as these investors faced losses due to the downturn of SoftBank’s investments in startups like WeWork Inc and Didi Global.
A Strategic Move with Long-Term Implications
To ensure transparency and fairness in the decision-making process, Masayoshi Son has excluded himself from VF1’s deliberations and appointed the Raine Group as the investment bank to advise SoftBank on the negotiations. The negotiations are being handled by VF1’s investment committee and SoftBank’s investment advisory board, attended by fund investor representatives.
Arm’s IPO and SoftBank’s Strategic Goals
Arm’s forthcoming IPO holds the potential to benefit not only VF1 but also Soft Bank, which recently reported its third consecutive quarterly loss. SoftBank has been in negotiations with technology companies, including Amazon.com Inc, to secure cornerstone investors for Arm ahead of its IPO.
This development comes as Arm prepares for its IPO, following the collapse of a deal to sell the company to Nvidia Corp last year. The IPO plans align with a revival of the U.S. IPO market, which has seen companies like Instacart and Klaviyo Inc preparing to list on the New York Stock Exchange.
Arm’s unique business model, centered around licensing designs rather than manufacturing processing systems, has sustained it through fluctuations in the broader chip industry. While demand for smartphones has recently waned, Arm’s technology remains prevalent in smartphones and data centers, generating substantial royalty payments.
In recognition of Arm’s strategic significance, Soft Bank invited Arm Chief Executive Rene Haas to join its board of directors earlier this year.