SoftBank Is Seeking at Least $60 Billion in Arm IPO

(Bloomberg) -- SoftBank Group Corp. is seeking a valuation of at least $60 billion for Arm Ltd. when the business goes public, according to people familiar with the matter, aiming for a higher amount than it would have gotten from its failed sale of the chip designer to Nvidia Corp.

SoftBank is poised to appoint Goldman Sachs Group Inc., JPMorgan Chase & Co. and Mizuho Financial Group Inc. to lead a loan transaction for Arm ahead of the planned initial public offering, according to the people, who asked not to be identified because the situation is private. The firms handling the loan are likely to also have lead roles on the IPO, but the lineup isn’t final and more banks could be added, the people said.

Valuing Arm at more than $60 billion is a gambit for SoftBank Chief Executive Officer Masayoshi Son, who acquired the business in 2016 for about $32 billion. It would mean convincing investors that Arm deserves a higher valuation than its semiconductor peers -- and what the business would have fetched in the $40 billion Nvidia deal, which collapsed under regulatory pressure.

SoftBank shares slipped 1.5% in Tokyo trading.

Arm’s valuation could still change based on a variety of factors, including market conditions, the people said. Chip stocks enjoyed a big run-up during the pandemic, fueled in part by demand for work-at-home technology, but they’ve cooled this year. The Philadelphia Stock Exchange Semiconductor Index is down 11% in 2022.

SoftBank, Arm, Goldman Sachs, JPMorgan and Mizuho declined to comment.

Though Arm is little-known to consumers, its influence in the electronics industry is hard to overstate. The company’s technology is at the heart of components that run much of the modern economy and its presence is growing. The company licenses fundamental elements of semiconductors and also sells chip designs to many of the world’s largest companies.

But Arm’s pervasiveness is due in part to its relatively low fees. While there are billions of chips made each year that use Arm’s blueprints, it has about $2.6 billion in annual sales, a fraction of what companies such as Intel Corp. pull in. Based on an average revenue multiple for chip companies, Arm would be worth less than $30 billion.

SoftBank announced a deal to sell Arm to Nvidia in September 2020, but the transaction almost immediately faced obstacles. Arm’s customers opposed the takeover, and regulators around the world gave it close scrutiny. The deal began to unravel after the U.S. Federal Trade Commission sued to block it in December, and Nvidia walked away last month.

That sent SoftBank back to its previous plan to earn a return from Arm: an IPO. In pitching the offering, SoftBank and its bankers will argue that Arm shouldn’t be valued like a typical chip business. Arm is increasingly focusing on higher-value designs for products such as server chips, which can cost thousands of dollars for just one processor. 

SoftBank has said it’s aiming to conduct the IPO in its current fiscal year, which ends next March. Linking a margin loan to an IPO mandate has become a favorite tactic of Son, a 64-year-old billionaire who founded SoftBank 40 years ago. The approach helps test the risk appetites of the banks that want to underwrite the IPO. 

In 2018, SoftBank lined up commitments for a loan of $9 billion for its Vision Fund, provided by advisory firms that included arrangers of its Japanese wireless business’s IPO, Bloomberg reported. Last year, the fund arranged margin loans backed by its stakes in South Korean e-commerce giant Coupang Inc. and online food-delivery service DoorDash Inc.

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