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SoftBank to sell 25% of Arm to Saudi-backed fund

SoftBank to sell 25% of Arm to Saudi-backed fund

By:  and  in London

Son puts stake worth $8bn in UK’s largest tech company into $100bn Vision Fund

Japan’s SoftBank is set to sell a roughly $8bn stake in Arm, the UK chip designer it purchased only six months ago, placing 25 per cent of Britain’s largest technology company into a new, Saudi-backed $100bn investment fund.

The decision was made as the SoftBank-led fund looks to hit its fundraising goals and secure the backing of Mubadala, the Abu Dhabi state-backed investment group, which wanted the fund to own a portion of Arm, said two people close to the situation.

The two sides are closing in on an agreement that would see Mubadala commit $15bn to the fund, these people said, and help the Japanese company get closer to its stated $100bn target for the SoftBank Vision Fund.

The transaction would be the first significant move by the Vision Fund, which is intended to give Masayoshi Son, the deal-hungry billionaire who made SoftBank into a global internet and telecoms powerhouse, the firepower to pursue his blend of investing on behalf of his company and a small group of outside backers.

The biggest investor in the Vision Fund is Saudi Arabia’s Public Investment Fund, which said last year it would contribute up to $45bn after protracted talks between Mr Son and Mohammed bin Salman, Saudi Arabia’s deputy crown prince.

SoftBank is putting about $25bn into the fund — though a portion of that will be covered by the Arm stake. Others planning to invest at a smaller scale include Apple, Qualcomm and Oracle founder Larry Ellison, as well as Foxconn, the Taiwanese electronics manufacturer.

Downing Street was notified of SoftBank’s intentions but is understood to have raised no concerns. Number 10 and SoftBank declined to comment.

Mubadala said: “We’re having ongoing, fruitful discussions over our participation in the fund.”

It added: “Arm is certainly a strong technology company with great, continued potential.”

The Abu Dhabi group has been focused on increasing its technology investments over the past decade, including in the semiconductor sector.

SoftBank agreed to buy Arm for $32.4bn in July 2016, just weeks after the UK voted to leave the EU, fulfilling Mr Son’s desire to own a chip designer that he believes will be at the heart of the internet of things and connected devices.

The transaction, which completed in September, was announced just days after Theresa May replaced David Cameron as UK prime minister. Mrs May spoke to SoftBank before completion of the Arm deal last year and Downing Street said at the time: “This is clearly a vote of confidence in Britain.”

As part of the deal, SoftBank made a series of binding agreements to signify its commitment to the UK, including one to double Arm’s UK-based workforce over five years.

However, some questioned whether the UK was selling the crown jewels of its tech sector to a foreign investor at a low price. Hermann Hauser, Arm’s founder, described the deal as one of the “sad and unintended consequences” of Brexit.

By selling a portion of Arm to the fund, Mr Son is likely to invite closer scrutiny of his burgeoning role as a global dealmaker, especially now that his investments are made through a fund with a diverse array of investors.

Late last year, Mr Son met Donald Trump at Trump Tower in New York and pledged, without offering details, to invest $50bn in the US and to create 50,000 jobs.

The $100bn target for the fund, and the speed with which it is being assembled, represents a new frontier for venture capital and private equity.

In anticipation of the fund’s first closing, Mr Son has been striking deals. SoftBank is in talks to invest $3bn in WeWork, a shared office space company, at a valuation of about $17bn, which would also be offered to the fund if it is agreed, according to one person close to the matter.

SoftBank invested $1bn last year in OneWeb, a satellite start-up seeking to provide internet access to remote parts of the world. In February, SoftBank said it planned to invest a further $1.7bn to merge OneWeb with Intelsat, another satellite company, if it persuades Intelsat bondholders to sign up to the deal. Those deals are set to be offered to the Vision Fund.

However, a recent $3.3bn deal by SoftBank to acquire Fortress Investment Group, the US alternative asset manager, will not be offered to the fund.

Additional reporting by Simeon Kerr

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

https://www.ft.com/content/e4fe85cc-037e-11e7-ace0-1ce02ef0def9

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