ALEX BRUMMER: The sale of Arm Holdings to Nvidia could be the most damaging takeover in 20 years
Of all the many overseas takeovers of British firms in the past two decades, none could be more damaging to the national interest and the UK’s ambitions to be Europe’s technological power house than the sale of Cambridge-based Arm Holdings.
The proposed £30 billion disposal of this star in the modern-manufacturing firmament to American giant Nvidia would be a huge betrayal of Britain’s high-tech future and could destroy the fabric of a great company.
Arm is perhaps the greatest tech company Britain has created. It became a giant on the back of the research genius of Cambridge University and produces a unique chip and software technology that is the envy of the world.
Nvidia CEO Jensen Huang is pictured above. The proposed £30 billion disposal of this star in the modern-manufacturing firmament to American giant Nvidia would be a huge betrayal of Britain’s high-tech future and could destroy the fabric of a great company
Its ‘smart chip’ products are one of the key elements of the Apple and Samsung smartphones and are a vital stepping stone to the clever technology of the future.
By rights, it should be inviolable, a British titan leading the world.
But today the high-tech jewel is being treated by financial players like an old vase passed round at a car-boot sale.
The rot set in 2016 when Theresa May’s enfeebled government nodded through the first sale of the company to Japan’s Softbank in the aftermath of the Brexit referendum. It was an attempt to demonstrate Britain was open for business; and although Softbank pledged to uphold Arm’s integrity, it failed miserably in that task.
Now Softbank is selling this totemic company on to Nvidia, a £239 billion behemoth based in Santa Clara, whose business model threatens UK jobs, intellectual property and commercial freedom.
Nvidia’s acquisition of Arm would make it the dominant supplier of smart chips to Apple, Samsung and Chinese phone makers
The joint founder of Arm, Hermann Hauser, has warned that the sale of Europe’s last major tech firm to the Americans would be a ‘disaster’.
Arm has a critical role to play in Britain’s cyber defence and in driving the ‘smart’ revolution which will see much of the economy from motor cars to the domestic kettle develop as part of the internet of things.
Nvidia’s acquisition of Arm would make it the dominant supplier of smart chips to Apple, Samsung and Chinese phone makers.
It would thrust Arm, which maintains a politically neutral stance over where it licenses its smart chips, into the furnace of US-China relations. If, for example, rising tensions culminated in an American ban on exports to China, the business could be crippled.
Meanwhile, Nvidia is seeking to avoid political fire in Britain by promising to maintain Arm’s headquarters in Cambridge and to maintain staff levels. Such promises could become meaningless amid the economic conditions unleashed by the pandemic.
Despite safeguards demanded of Softbank in the 2016 sale, parts of Arm have already been hived off to Saudi investors and to Beijing. A second sale could make further disposals more likely.
But while many say the resale of Arm to Nvidia is a done deal, that is far from the case. Aside from possible regulatory and legal scrutiny in Britain, the sale faces big obstacles in the US. Nvidia competitors such as Intel will object on competition grounds, and the company can also expect a probe from the US government over concerns about technology leaks to China.
Boris Johnson should do everything in his powers to prevent this controversial transaction taking place.
Failing that, he must insist that legally enforceable undertakings made in 2016 to keep the headquarters in the UK and to double the workforce are renewed by Nvidia for at least five years.
Jensen Huang, Nvidia’s chief executive, says he wants to make Arm ‘even greater’. But such overblown rhetoric during a takeover battle often turns out to be worthless.
If the UK were determined to stop the deal, it could invoke powers under the 2002 Enterprise Act to stop any change of control that threatens the UK’s national security.
The ideal outcome would be to release Arm from overseas control and see it re-floated on the London Stock Exchange as an independent entity. This extraordinary British company needs all the protection it can get.
Despite safeguards demanded of Softbank in the 2016 sale, parts of Arm have already been hived off to Saudi investors and to Beijing. A second sale could make further disposals more likely
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