July 26, 2016 | Technology | Europe | Ended

ARM Holdings / SoftBank Group: Committed Buyer, Swift Timeline to Completion

SoftBank’s founder and CEO, Masayoshi Son, last week announced his latest largescale, long-term gamble - to acquire ARM Holdings for £24bn. Unless another suitor quickly rounds up lawyers and bankers and presents an acceptable competing offer, his takeover will likely close as planned in 3Q’16. Few synergies exist between ARM and SoftBank’s businesses, and Son’s latest “crazy idea” can be seen as “visionary, risky, or both”. SoftBank shares have declined 10.6% since the 18-Jul-16 announcement, as investors question SoftBank’s ability to realise synergies. They also believe SoftBank is overpaying, are impatient that merger benefits may take years - or decades - to accomplish, and worry about pro forma leverage. Many SoftBank investors hope that Son walks away from this bet and instead uses the cash to pay down debt or to fund its Sprint (S US) investment. However, with a Cooperation Agreement executed and a firm Scheme of Arrangement signed under UK rules, SoftBank cannot walk away and is committed to closing the deal by 17-Nov-16.

Contents 1. ARM and Its Role in the Semiconductor Industry 2. SoftBank’s Rationale, Manageable Debt and Deal Accretion 3. Financial Valuation and Antitrust Considerations 4. Counterbid Feasibility: Intel, Apple, Samsung, Siemens and Others 5. SoftBank’s Obligations to Close the Deal 6. Timing Expectations and How Quickly UK Schemes Can Close 7. Relevant Precedent Deals 8. Deal Structure and Details 9. Break Price, Implied Probabilities and the Risk Arbitrage Spread (32 pages)

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