ARM Holdings (ARMH) Sold to Japan-based SoftBank

The Brexit mandate may have taken the shine off the pound but British companies continue to attract international investors. This is reflected in Japan-based SoftBank Group Corp.'s SFTBY decision to acquire ARM Holdings plc ARMH for a whopping $32 billion.

It's an all-cash deal per which ARM will receive £17 per share ($22.50 per share approx.) at a 43% premium on Friday's closing price.

The deal is clearly understandable in the current scenario when the pound has depreciated against Japanese yen. 

SoftBank chief Masayoshi Son however has refused to cite this as a reason behind one of the biggest and quickest (2 weeks) takeover of a European technology business by an Asian company.

Why ARM Holdings?

Well, a straight forward answer would be that the company does not develop chips but designs the core engines embedded in chips, an area that has huge potential in every space that's Internet connected.

Though the link between Internet-of-Things (IoT) and telecommunications isn't clear at the moment, Son's visionary eyes are already seeing the future.

ARM designs microprocessors that power more than 95% of smartphones of the world. Yes, smartphones that have substituted PCsin some parts of the world.

Moreover, the company is trying to improve its IoT portfolio. If successful, everything that is connected may not have Intel inside but will certainly have ARM's design.

And that's what Softbank is looking at. The company has now got its hands on a technology that would make it easy for it to venture into any Internet-based space.

To industry watchers like us, the ARM buyout is a part of SoftBank's push into the advanced computing and artificial intelligence space.  SoftBank believes that ARM has the capacity to contribute significantly to the development of chips that will power these new technologies.

We do not often see ARM coming into the limelight, but it has a major presence in the chip industry with its processor and graphics technology and Softbank appears to be the first company to realize this capacity.

From Britain's perspective, this capital investment is meaningful and could lessen the impact of Brexit on the U.K. technology sector. That probably is the reason why Prime Minister Theresa May did not mind discussing things with Son and the government welcomed the deal.

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Benefits for ARM

ARM designs chips for big companies like Apple Inc. AAPL, QUALCOMM Incorporated QCOM and Samsung. 

Just like Intel has a near monopoly in PCs, ARM rules the roost in smartphones. Intel has had nearly no success in the smartphone space. The deal may pose concerns for Intel as ARM will now have access to SoftBank's resources and Softbank is going full-steam into the Internet of Things (IoT) where Intel is also trying to build a position.

Softbank has assured that it will preserve and help grow ARM's brand name and existing culture. The company is also considering doubling the number of ARM employees in Britain.

At present, ARM has a Zacks Rank #4 (Sell).

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