ARM turning Japanese with £23bn offer from SoftBank after pound sinks

18th Jul 2016 06:41

(ShareCast News) - ARM Holdings has agreed to a £23.4bn takeover offer from Japan's Softbank, in what could be the first major move sparked by the post-Brexit collapse in the pound.The board of the Cambridge-based chip designer, which is a major supplier of components for smartphones made by the likes of Apple and Samsung, said it unanimously recommended the 1,700p-per-share cash offer, which is a 43% premium to the 1,188.73p price at which trading closed on Friday.SoftBank's offer price values ARM's shares at approximately £24.3bn, with shareholders still on the register on 8 September due to receive a dividend of 3.78p per share. ARM has also proposed a final dividend of up to 6.76p per share to be paid in May 2017, although if the effective date of acquisition occurs earlier it will not be paid out.ARM's cost in Japanese yen has fallen nearly 30% due to the weakening of the pound in the wake of the Brexit vote on 23 June and analysts said it would not be surprising to see other bids for UK companies in coming weeks thanks to the fall in sterling.SoftBank, which owns a majority stake in US telecoms operator Sprint after its £17m deal in 2013, said it would maintain ARM's headquarters in Cambridge and planned to "at least double" staff numbers in the UK over the next five years as well as expanding headcount overseas.Chairman and chief executive Masayoshi Son, who at a press conference on Monday revealed he had only met ARM's board two weeks ago, expressed his long-held admiration of ARM as a market-leader in its field "by some distance" and said the main rationale for the deal was the company's leading position in the 'Internet of Things' where he saw the potential for a huge "paradigm shift".ARM's chairman, Stuart Chambers, said: "It is the view of the board that this is a compelling offer for ARM shareholders, which secures the delivery of future value today and in cash. The board of ARM is reassured that ARM will remain a very significant UK business and will continue to play a key role in the development of new technology."Shares in ARM quickly surged 43% to 1,699p on Monday morning, while new UK chancellor Philip Hammond hailing the wider implications of the deal as showing that Britian "has lost none of its allure to international investors".Analysts felt the deal is likely to go through given there is no existing conflict of interest for SoftBank in ARM's markets, with Berenberg saying a counterbid is "unlikely".JP Morgan Cazenove refused to rule this out, however: "We believe this was an unsolicited bid for the company so we do not think the company has not been 'shopped' to other potential bidders meaning that if an independent bidder such as Softbank with a higher bid showed interest, the board could change its opinion. On the other hand we do not believe tech industry companies such as Intel, Apple are likely bidders because their bids create conflicts of interest as competitors (regulatory issues) and customers (to the business model)."Kepler Cheuvreux recommended ARM Holdings shareholders accept the "generous" offer: "Even though a share price of 1,700p might have become reachable on a stand-alone basis, it likely would have taken ARM Holdings shares several years and required a lot of patience from investors."Chris Beauchamp at IG said he thought the ARM deal could be the first in a procession of deals of overseas companies buying UK businesses due to the pound slide since the EU referendum result."It won't be an ugly rush, since ongoing political uncertainty will make it even more important for acquisitive firms to pick their targets carefully, and questions will linger over just how protectionist the UK may become with regards to some of its prized assets. Nonetheless, as a sign of confidence, the deal is very welcome indeed."