ARM Holdings plc in £24.3bn takeover by Japanese bidder

ARM Holdings plc in £24.3bn takeover by Japanese bidder

Less than a month since the Brexit vote we have seen the largest proposed public M&A transaction of 2016 to date.

On 18 July 2016, Japanese-incorporated SoftBank Group Corp (SoftBank) made an all-cash offer for leading UK-based technology company ARM Holdings plc (ARM), structured by way of a scheme of arrangement.

ARM shareholders are set to receive 1700p per share held, valuing the acquisition at £24.3bn. The consideration offered represents a 43% premium to the closing price of ARM on the last business day prior to the firm offer announcement. As of 18 July 2016, the acquisition is the largest deal of 2016 by transaction value—19.8% higher than the second largest deal, the £20.3bn merger of the London Stock Exchange and Deutsche Boerse announced in March 2016. See deal summary: London Stock Exchange Group plc—offer by Deutsche Boerse AG

At the date of the announcement SoftBank's market capitalisation on the Tokyo Stock Exchange was approximately £46.3bn (¥6.468tn), down 10% from the last business day prior to the firm offer. This may indicate a common view among bidder shareholders that SoftBank is overpaying—the offer value itself represents a significant proportion (52%) of SoftBank's market capitalisation.

Why did SoftBank pay a 43% premium?

SoftBank may consider ARM to have significant growth potential. This is supported by its references to developing ARM's 'Internet of Things' business and its leadership position in IP licensing and R&D outsourcing services to semi-conductor companies. SoftBank may also view ARM as undervalued but without a profit forecast or quantified benefits statement provided in the firm offer announcement it is too early to draw any definitive conclusions.

There was a significant rise in actual and competing bid scenarios in the first half of 2016 compared to the equivalent period in 2015. With the competitive landscape for UK public M&A improving, the 43% premium being offered to ARM's shareholders may

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