Nvidia and Arm fight back, say deal critics ‘romanticizing’ on British chipmaker's past

• Critics of the takeover deal accused of inflating market power of Arm

• Firms argue that blocking the deal would reduce UK investment

Nvidia Corp and Arm Ltd expressed their grievances against critics of the blockbuster $54 billion chip deal, arguing that the acquisition isn’t as powerful as some critics are claiming.

In a 28-page document to the U.K.’s Competition and Markets Authority (CMA), the semiconductor giants outlined why the deal should be approved.

They accused that the critics are “romanticizing” Arm’s past, ignoring the company’s current financial position, and overstating Arm’s current market power.

In the document, both the companies said if the British chipmaker had control over markets, “it would have sizable revenue growth and would be enormously profitable.”

Concerns regarding deal

In September 2020, the U.S. chipmaker Nvidia agreed to buy Arm in a cash-and-stock deal for $40 billion. With Nvidia’s stock price surging over the past year as the proposed agreement has stuck under regulatory review, the actual value of the transaction is now pegged close to $54 billion.

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As the agreement is being closely scrutinized by regulators in the U.S., the U.K., Europe, and China, the deal is unlikely to be completed before the initial deadline of March 2022.

Regulators are concerned that the acquisition would reduce competition.

While the UK’s CMA said, “We’re concerned that Nvidia controlling ARM could create real problems for Nvidia’s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets,” EU antitrust regulators said, “transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.”

Chip giants vs. regulators

Regarding the concerns, the pair, in its written statement, said, “Trying to foreclose Arm licensees would immediately reduce Arm’s licensing revenue, immediately damaging Nvidia’s investment. No economically rational, publicly-traded entity would embrace such a self-defeating strategy.”

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Nvidia and Arm also said that blocking the deal would not promote competition and could reduce British investment.

Britain’s Digital and Culture Secretary, Nadine Dorries, ordered a “phase 2” probe in November, which will investigate antitrust concerns and national security issues associated with the deal, and the CMA is expected to deliver a final report in May 2.

While the U.S. Federal Trade Commission (FTC) sued to block the deal in December on antitrust grounds, the European Commission launched an in-depth investigation in October.

Picture Credit: Private Equity Insights