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SoftBank has made a significant investment in UK chip designer Arm, valuing the company at $64 billion. This move allows the Japanese conglomerate to gain full control over Arm and aim for stability in its stock price ahead of an upcoming listing scheduled for next month.
The deal involved SoftBank acquiring the remaining 25% stake in Arm from the Vision Fund, a $100 billion fund backed by Saudi Arabia and managed by SoftBank. People familiar with the transaction revealed that SoftBank estimated the Vision Fund’s stake to be worth approximately $16 billion, twice the amount the fund initially paid in 2017.
Under the leadership of Masayoshi Son, SoftBank purchased Arm for $32 billion in 2016 and plans to list the company in New York. Initial details regarding the IPO are expected to be released publicly on Monday, as per sources close to the preparations.
SoftBank and the Vision Fund declined to comment on the deal, which was first reported by the Wall Street Journal. This internal transaction guarantees returns for the Vision Fund’s investors, including sovereign wealth funds from Saudi Arabia and Abu Dhabi, who partnered with SoftBank to establish the ambitious tech fund in 2017.
This success comes after a series of disappointments for the Vision Fund, including unsuccessful investments in companies like WeWork and FTX. As a result, the Vision Fund laid off numerous employees last year.
By transferring the stake back to SoftBank, uncertainty is removed for future Arm investors concerning the timing and extent of the Vision Fund selling off its stake after the IPO.
Sources familiar with SoftBank’s perspective indicate that this deal reflects their confidence in achieving a higher valuation for Arm during the IPO. The original transaction with the Vision Fund in 2017 limited SoftBank’s potential return to doubling its investment of $8 billion, leaving little room for further gains if Arm’s IPO valuation exceeded $64 billion.
In its recent financial results, SoftBank reported a fair-value assessment of $45 billion for Arm by the end of June, marking a 13% increase from the previous quarter.
SoftBank aims to persuade public market investors, who have experienced a scarcity of significant tech listings for the past 18 months, to pay a premium for a company at the forefront of smartphone technology, with interests in automotive, data centers, and artificial intelligence sectors.
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