ARM deal ‘opens floodgates for foreign bidders’

Yes vote: Shareholders in ARM Holdings have approves a £24 billion takeover by Japan’s SoftBank

30 August 2016

Investors in ARM Holdings have given their overwhelming backing to its £24 billion takeover by Softbank, potentially opening the door to a wave of British takeovers by foreign companies taking advantage of the pound’s weakness since the Brexit vote.

Shareholders nodded through the deal at two meetings in the City on Tuesday, clearing the way for the deal to complete on September 5.

The controversial takeover was announced just three weeks after the referendum vote for the UK to leave the European Union.

The 12% fall in the pound since the vote made ARM considerably cheaper for the Japanese buyer. At the time it was welcomed by the Government as a clear sign that, despite the Brexit decision, Britain remained open for business.

Since then there has been growing disquiet that the takeover of one of the main suppliers of chips to Apple’s iPhone and hundreds of other high-tech devices had fallen to a foreign buyer.

There are also growing fears that other UK companies, not just in the tech sector, could be vulnerable to foreign bids from the US or Far East.

Russ Shaw, founder of Tech London Advocates, said: “With the decline on the value of sterling, UK company valuations are cheaper on the world stage. There are definitely more large companies scanning the UK for potential acquisitions. They are from the US and the Far East and particularly China."

“They are looking at anything from $1 billion-plus unicorns, of which we have 14 in London, to start-ups valued at $10 million, $50 million or more than $100 million.”

Shaw said while the UK has developed hundreds of high-tech companies, the challenge they face “is to keep them growing and encourage them to go out and do the deals despite the weaker pound”.

Richard Holway, chairman of TechMarketView, said: “Every quoted UK tech company is vulnerable. All the way from Imagination to Sage to MicroFocus to Aveva, with everyone in between. The devaluation of the pound makes UK companies even more attractive. The US tax rules, making it difficult to repatriate overseas profits, also encourage US companies to acquire in the UK.”

Softbank, at the time of the deal, said it planned to increase investment in ARM’s business, centred in Cambridge, and would double the size of its workforce in the UK. But these promises have been questioned with former City minister Lord Myners claiming they were “not worth the paper they were written on”.

MORE ABOUT

ARM Holdings

ARM deal ‘opens floodgates for foreign bidders’

Read More