Exclusive: SoftBank in talks to buy Vision Fund’s 25% stake in Arm -sources

NEW YORK, Aug 13 (Reuters) – SoftBank Group Corp (9984.T) is in talks to acquire the 25% stake in Arm Ltd it does not directly own from Vision Fund 1 (VF1), a $100 billion investment fund it raised in 2017, according to people familiar with the matter, potentially delivering a win for investors who have waited years for strong returns.

The discussions come as SoftBank, which currently owns 75% of Arm, is preparing to list the chip designer on Nasdaq next month at a valuation of $60 billion to $70 billion.

If the negotiations lead to a deal, the Japanese tech investor would be delivering a major, immediate windfall to VF1 investors, including Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala. They nursed losses after many of SoftBank’s bets on startups such as workspace provider WeWork Inc (WE.N) and ride-sharing firm Didi Global (92Sy.MU) soured.

The alternative — letting VF1 sell its Arm shares in the stock market over time following the initial public offering (IPO) — would typically take at least one to two years given the size of the stake. It would also be more risky for the fund’s investors since it is possible that Arm’s shares could drop following the IPO.

VF1 returned to profitability in the latest quarter thanks to investors’ excitement around artificial intelligence boosting the value of some of the startups in which it invested. Yet its previous losses prevented SoftBank from securing outside investors for Vision Fund 2 (VF2), whose $56 billion in capital came from the Japanese firm and its management, including Chief Executive Masayoshi Son.

A big windfall for VF1 investors could boost SoftBank’s chances of tapping them for capital again in the future, though SoftBank currently has no plans to do so, according to the sources.

Son, who has hired investment bank Raine Group to advise SoftBank on the negotiations, has recused himself from VF1’s deliberations on the matter so that the fund makes a decision independently in the interest of its investors, the sources said.

VF1’s investment committee and SoftBank’s investment advisory board, attended by fund investor representatives, are handling the negotiations, one of the sources added.

The exact valuation for Arm that the two sides are discussing for their transaction could not be learned, and the sources cautioned that it is possible that no agreement will be reached.

If a deal is inked, SoftBank would be selling fewer Arm shares in the IPO and would be likely retaining a stake of between 85% and 90%, according to the sources, who requested anonymity because the negotiations are confidential.

SoftBank, VF1 and Arm declined to comment. Raine did not immediately respond to requests for comment.

CORNERSTONE INVESTORS

Arm’s IPO would be a boon not just for VF1 but also for SoftBank, which reported its third consecutive quarterly loss last week. It was hit by declines in the valuations of major holdings such as Chinese e-commerce firm Alibaba Group (9988.HK), German telecommunications company Deutsche Telekom (DTEGn.DE) and U.S. wireless carrier T-Mobile U.S. (TMUS.O).

SoftBank, which took Arm private for $32 billion in 2016, sold a 25% stake in the company to VF1 for $8 billion in 2017. SoftBank has also been in talks with several technology companies about bringing them onboard as cornerstone investors in Arm ahead of its IPO, including Amazon.com Inc (AMZN.O), Reuters has reported.

SoftBank last week said VF1 delivered a gain of $12.4 billion on $89.6 billion of investments, while VF2 carried a $18.6 billion loss on $51.8 billion of investments.

The investment giant has been in “defense mode” since May 2022 after technology valuations crashed amid a rise in interest rates and economic uncertainty. But in June, Son said he was planning to shift to “offence” mode amid excitement over advances in artificial intelligence.

SoftBank began preparations for an IPO of Arm after a deal to sell the company to Nvidia Corp (NVDA.O) for $40 billion collapsed last year over objections from U.S. and European antitrust regulators.

Arm has been considering an offering up to $10 billion for its listing. Its plans to go public come as the U.S. IPO market shows signs of a recovery after an arid spell that lasted a year and a half, as major companies including grocery delivery service Instacart and marketing automation firm Klaviyo Inc get ready to list in New York.

Earlier this year, Arm rebuffed a campaign from the British government to list its shares in London and said it would pursue a flotation on a U.S. exchange.

Arm’s business has fared better than the broader chip industry because it licenses designs rather than paying to make processing systems itself. Its technology has become ubiquitous in smart phones and data centers, delivering lucrative royalty payments. Yet demand for smart phones has weakened lately, weighing on Arm’s earnings.

In a show of Arm’s significance for its investment portfolio, SoftBank in April asked Arm Chief Executive Rene Haas to join its board of directors.

Image by: Reuters

Shopping Cart

Media Kit

    Data Protection

    Personal Data (“Data”) submitted for Media Kit (“Media Kit”), and/or collected in the form of first name, last name, email address and other contact details may be used for the purposes of inviting you to future events and for reaching out to you with content which may be of interest to you. For these purposes, The Digital Banker will share the Data with our associate companies (including event and content sponsors) to promote their products and services. You will also be automatically subscribed as a user on www.thedigitalbanker.com. If you would like to opt-out, email us at [email protected].

    By clicking Submit, you acknowledge that you consent/ have sufficient informed consent to the collection, use and disclosure of Data as set out above.

    The Digital Banker Summit

    Moving on from FTX: is 2023 the year of CBDCs?

    Indonesia, Jakarta

    Thailand, Bangkok

    Philippines, Manila

    Contact Us

      Data Protection

      The information you provide will be held on our database and may be used to keep you informed of our and our associate companies’ products and for selected third party mailings. Please tick the box if you would prefer not to be contacted for these purposes:

      Request Nomination Pack

        Data Protection

        The information you provide will be held on our database and may be used to keep you informed of our and our associate companies’ products and for selected third party mailings. Please tick the box if you would prefer not to be contacted for these purposes:

        Registration Form

          Data Protection

          The information you provide will be held on our database and may be used to keep you informed of our and our associate companies’ products and for selected third party mailings. Please tick the box if you would prefer not to be contacted for these purposes:

          Registration Form

            Data Protection

            The information you provide will be held on our database and may be used to keep you informed of our and our associate companies’ products and for selected third party mailings. Please tick the box if you would prefer not to be contacted for these purposes:

            Registration Form

              Data Protection

              The information you provide will be held on our database and may be used to keep you informed of our and our associate companies’ products and for selected third party mailings. Please tick the box if you would prefer not to be contacted for these purposes:

              Registration Form

                Data Protection

                The information you provide will be held on our database and may be used to keep you informed of our and our associate companies’ products and for selected third party mailings. Please tick the box if you would prefer not to be contacted for these purposes:

                Registration Form

                  Data Protection

                  The information you provide will be held on our database and may be used to keep you informed of our and our associate companies’ products and for selected third party mailings. Please tick the box if you would prefer not to be contacted for these purposes:

                  The world’s preeminent Private Banks and Wealth Managers are demonstrating a committed drive in innovation, advisory, new products and services to meet the sophisticated needs of their clients.

                  COVID-19
                  Amid economic activity revival on the back of the Covid-19 vaccine program, organisations moving from business continuity plans to stable working environments, together with the slightest improvement in unemployment numbers, forced the world to adjust to new realities. Coming to terms with the “new normal”, global investors are now on the look-out for attractive and stable investment opportunities.

                  Needs of Private Wealth customers and families worldwide have drastically changed due to the pandemic and banks have had to accelerate efforts to deploy a multi-channel service strategy and safeguard clients’ businesses and wealth against negative impacts of economic uncertainly.

                  The Global Private Banking Innovation Awards will recognise the world’s best private banks, wealth managers and asset managers that are championing innovation across advisory, service, products, customer experience and more.

                  Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. 

                  Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

                  Request Nomination Pack

                  Error: Contact form not found.