Nvidia Calls Off Acquisition of Chip-Designer Arm. It’s Not a Surprise.

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Shares of

Nvidia

fell in premarket trading Tuesday after the graphics chipmaker and Japan’s

SoftBank

agreed to call off Nvidia’s deal to buy microprocessor design house Arm.

The deal’s collapse doesn’t come as a surprise.

“The parties agreed to terminate the agreement because of significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties,” Nvidia (ticker: NVDA) and SoftBank (JP:9984) said in a joint statement.

The Federal Trade Commission sued to block Nvidia’s acquisition of Arm back in December, citing competition concerns. After the FTC sued to block the transaction, analysts at Citibank slashed the probability of the deal going through to 5% from 30%.

SoftBank, which is the parent company of Arm, said it would begin planning for a public offering of the U.K.-based chip business. 

An initial public offering of ARM could be the largest ever chip IPO. SoftBank said the offering would be made sometime in the fiscal year ending March 2023.

SoftBank also said Arm President Rene Haas would be replacing Simon Segars as Arm’s new chief executive.

SoftBank bought Arm for $31.4 billion in 2016. Nvidia in September 2020 agreed to buy Arm for $12 billion in cash and 219 million Nvidia shares, or about $40 billion. The value of the proposed transaction has risen given appreciation in Nvidia’s stock price.

Nvidia shares were down 1.4% early Tuesday to $243.86. Following the close of trading Monday, Nvidia shares have declined 15.9% year to date but have risen more than 73% over the past one year. Nvidia’s market capitalization is about $608 billion.

Write to Joe Woelfel at joseph.woelfel@barrons.com