Tech giant ARM Holdings sold to Japanese firm for £24bn

Britain’s biggest technology company is set to fall into foreign ownership after ARM Holdings accepted a £24.3bn offer from Japanese group SoftBank.

The deal poses an early headache for Theresa May, the new prime minister, who has pledged to draw up an industrial strategy for Britain but is also keen to attract investment into the country after the EU referendum.

Philip Hammond, the chancellor, said that the deal showed that Britain “has lost none of its allure to international investors”, but industry leaders warned it was a setback for the country.

ARM designs the chips that power more than 95% of smartphones around the world and its technology is effectively the brains behind the iPhone.

SoftBank’s offer would represent the biggest-ever investment from Asia into the UK and the second-largest foreign takeover of a UK-listed company, behind only ABInBev’s deal to buy SABMiller.

“Britain is open for business, and open to foreign investment,” Hammond said. “SoftBank’s decision confirms that Britain remains one of the most attractive destinations globally for investors to create jobs and wealth.”

However, Hermann Hauser, who helped to found ARM in 1990, criticised the deal.

“ARM is the greatest achievement of my life. This is a sad day for ARM and a sad day for technology in the UK,” he said. “It is the last technology company that is relevant in the UK. There will now be strategic decisions taken in Japan that may or may not help ARM in the UK.

“Theresa May is on record as saying she wants an industrial strategy. Given the financial rules, I think it is difficult for her to stop it, but if she wants an industrial strategy and a world-leading technology company, then she should try.”

Masayoshi Son, the founder and chief executive of SoftBank, said he was willing to make a legally binding commitment to at least double the workforce at ARM headquarters in Cambridge within the next five years. ARM employs 1,600 people, primarily engineers, at its base at present.

“That specific process is going to be discussed with the Takeover Panel in the next several days and we would like to convert this intention to be legally binding,” Son said, speaking in London on Monday. “We did not need to do that. It’s just my way of showing commitment to the UK.

“At the end of the fifth year, if we have not doubled the number of employees in UK, the court will have the right to enforce us to do that. I am willing to go that far in my commitment.”

Such a legal commitment would be unprecedented and it was welcomed by the government and ARM.

A spokeswoman for the prime minister denied that government support for the deal contradicted May’s pledge for an industrial strategy. She said: “We don’t see it like that. The point she was making was that we should look clearly at each case. This is a £24bn investment into the economy, a commitment to keeping the company in Cambridge and doubling the number of jobs in five years.”

The board of ARM has recommended that shareholders accept the offer from the Japanese telecoms and tech group, which controls US mobile phone network Sprint and Yahoo Japan. ARM shareholders will vote on the deal at a meeting scheduled to take place before November, with 75% approval needed for the agreement to be completed.

Simon Segars, chief executive of ARM, said the deal was good for Britain. “When I look at Masayoshi’s investment history that to me and my board looks like a good environment for ARM to be in right now,” he said. “This allows us to increase our ambition and do more faster.”

Son said he wanted to “enhance the winning formula” that ARM had established and maintain its “neutrality and independence”. He denied that the takeover bid is an opportunistic attempt to buy ARM on the cheap following Britain’s vote to leave the EU, despite only starting talks with the UK company two weeks ago.

The fall in the value of sterling since the referendum means the pound is now down almost 30% against the Japanese yen compared with a year ago, making it cheaper for SoftBank to invest in the UK. However, shares in ARM have rise by 17% since the referendum because it makes most of its profit in dollars. This means that SoftBank is actually paying more for ARM than it would have done before the 23 June vote.

“Brexit did not affect my decision,” Son said. “Many people are worried about Brexit and concerned about the complex situation of the country, but in a good or bad way it did not affect it. I did not make the investment because of Brexit.”

Instead, the Japanese tycoon said he was proposing the deal now because he believes ARM can lead the “internet of things” revolution, in which everyday electrical devices such as fridges are connected to the internet and fitted with chips.

“The next big paradigm shift is coming in IoT [the internet of things],” he said. “ARM is going to be everywhere in the internet of things.”

Son spoke to the prime minister and chancellor on Sunday before flying to the UK to announce the deal, then met Hammond for face-to-face talks on Monday morning.

“I talked about doubling the employment in the UK, keeping the headquarters in the UK, and enhancing the ecosystem in the UK. They said ‘wow, that’s good’,” Son said.

“Many people don’t understand the complicated situation in the country. I am one of the very few people to bet with big cash, not just talk. Talking is easy. The price we are paying is almost 68 times last year’s income. That means the company has to sustain its growth and success for many years to come. I cannot hit and run. I have to truly believe in the future of the UK, the power of engineers in the UK. This is my big bet.”