SoftBank Negotiates Acquisition of 25% Stake in Arm Ahead of IPO with Vision Fund

If Negotiations Succeed, SoftBank Will Hold All Shares
Investor Profit Guarantee → Aimed at Restoring Fund Trust

Japanese SoftBank has reportedly entered negotiations with its subsidiary Vision Fund over a 25% stake in the UK semiconductor company Arm. The plan is to secure the entire stake in Arm ahead of its initial public offering (IPO) next month to guarantee returns for investors.

On the 13th (local time), major foreign media outlets cited multiple sources reporting that SoftBank is discussing acquiring the 25% stake in Arm held by its subsidiary Vision Fund 1 (VF1). Currently, SoftBank holds 75% of Arm's shares, while Vision Fund 1 owns 25%. If the negotiations succeed, SoftBank will own the entire stake in Arm.

[Image source=Reuters Yonhap News]

The reason SoftBank is pushing to buy its subsidiary's stake is reportedly to guarantee returns to Vision Fund 1 investors such as Saudi Arabia's sovereign wealth fund, the Public Investment Fund (PIF), and Abu Dhabi's sovereign wealth fund, Mubadala. Vision Fund 1 has suffered massive losses from investments in companies like office-sharing firm WeWork and Chinese ride-hailing company Didi Chuxing, so selling its stake in Arm is seen as a way to ensure returns for these investors.

There is also an option for Vision Fund 1 to sell its shares on the stock market after Arm's IPO to deliver returns to investors, but considering the size of the stake, this process is expected to take at least one to two years, and there are concerns that Arm's stock price could plummet during that time.

Although SoftBank has recently revived amid the AI boom, it had faced difficulties due to investment failures for some time. Analysts suggest that SoftBank purchasing Arm shares and Vision Fund 1 making a profit could pave the way for future fund-raising opportunities for other investments.

For this negotiation, SoftBank Chairman Masayoshi Son reportedly hired external investment advisors such as the investment bank Raine Group. This move aims to allow Vision Fund 1 to make independent decisions rather than reflecting Son's personal opinions in the negotiations.

One source said, "It is unclear what value both sides are currently discussing regarding Arm's stake," adding, "The negotiations could also fall through." The source further noted that if the deal is finalized, the amount of Arm shares SoftBank offers in the IPO will decrease, and SoftBank might maintain a stake of 85-90%.

SoftBank is planning to launch the IPO on the US Nasdaq stock exchange next month. If successful, the market capitalization is expected to exceed $60 billion (approximately 79 trillion KRW), making it the largest IPO on the US stock market this year. It is reported that major semiconductor companies such as Nvidia, Apple, Samsung Electronics, and Intel are being considered as anchor investors for this IPO.

Arm, a fabless semiconductor design company, holds core technologies that form the basis for designing computer central processing units (CPUs) and smartphone application processor (AP) chips. The company commands a 90% market share in mobile chip design and has recently expanded and developed technologies related to the AI industry, including data center semiconductor design capabilities.

Arm was acquired by SoftBank, led by Chairman Masayoshi Son, in 2016 for $32 billion. After SoftBank's management situation deteriorated, it initially agreed in September 2020 to sell Arm to Nvidia for $40 billion, but the deal was canceled last year due to opposition from regulatory authorities worldwide. Since then, SoftBank has been pursuing an IPO.

This content was produced with the assistance of AI translation services.