Nvidia’s $40 Billion Arm Deal Faces U.K. Antitrust Hurdle

(Bloomberg) -- Nvidia Corp.’s planned $40 billion takeover of chipmaker Arm Ltd. faces months of delays after British regulators called for a longer probe into antitrust concerns.

In the first reaction on the deal from a major antitrust watchdog, the Competition and Markets Authority warned the deal could allow Nvidia to cut off its rivals’ access to Arm’s ubiquitous and power-efficient designs used in technology ranging from data centers to smartphones.

Nvidia’s move to buy Arm from Japan’s SoftBank Group Corp. initially raised antitrust concerns from rivals and customers such as Qualcomm Inc. and Alphabet Inc.’s Google over how Nvidia might control Arm’s licenses for essential chip technology. They fear Nvidia’s takeover will threaten Arm’s role as the Switzerland of the industry.

“This is very much about having potential ownership of Arm by a direct competitor who might also want to allocate R&D differently than Arm does it today, which is so foundational for the industry,” said Boston Consulting Group partner Antonio Varas in a phone interview.

U.K. Digital Secretary Oliver Dowden must still decide whether the CMA should open an in-depth probe. Dowden is also separately weighing whether the deal should be blocked over potential risks to national security, a review that would run in parallel to the antitrust investigation. The U.K. is leaning toward a security veto, according to a person familiar with the matter earlier this month.

Nvidia’s Chief Financial Officer Colette Kress acknowledged on an earnings call this week that “discussions with regulators are taking longer than initially thought.” 

Lengthy regulatory reviews look set to see the company miss its initial target to close in March 2022, which can be extended until September. An in-depth U.K. probe could take at least four months, with a potential eight-week extension. Nvidia hasn’t yet filed for European Union approval, where an extended review takes at least five months but often lasts much longer for complicated cases. The U.S. is also examining the deal.

‘Confident’

Nvidia looks “forward to the opportunity to address the CMA’s initial views and resolve any concerns the government may have,” the company said in an emailed statement.

“We remain confident that this transaction will be beneficial to Arm, its licensees, competition, and the U.K.,” it added.

Nvidia shares rose 2.2% at 11:59 a.m. in New York.

While a longer probe raises the risk of a veto to a deal, it can also give more time for companies to negotiate more complicated concessions. The CMA said it rejected as insufficient Nvidia’s offer to maintain Arm’s open licensing, nor did it see a partial sale of Arm intellectual property as allaying its concerns at this stage.

Arm owns the most widely used set of standards and designs in the $400 billion chip industry. Its technology is at the heart of most of the world’s smartphones and is finding an increasing role in computing, including in server machinery that runs corporate and government systems.

The Cambridge, England-based company has acted as a neutral party that sells chip blueprints and licenses its standards to a wide range of major technology companies, many of whom are fierce competitors. Ownership by Japan’s SoftBank, which acquired it in 2016 and which doesn’t overlap with Arm’s customers, has preserved that neutrality.

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