Intel is in talks to be an anchor investor in SoftBank Group Corp’s (9984.T) Arm to help the chip designer’s initial public offering (IPO) get off the ground, a source familiar with the matter told Reuters on Monday. Arm is expected to sell its shares on Nasdaq later this year, seeking to raise $8-$10 billion, Reuters reported earlier in April.
A successful IPO for Arm would mark a significant milestone in the semiconductor industry. The company designs chips that are used in everything from smartphones to data centers, and the proceeds of its IPO could help it invest in research and development. It would also boost the market for IPOs during a relatively moribund time for the industry.
But the IPO of the UK-based company is far from a done deal. While the discussions with Intel have intensified, it is still being determined how much will be invested in the IPO and what the IPO structure will look like.
The deal comes as Intel CEO Pat Gelsinger pushes for a new business model to return the company to the top of the chip industry. That included opening Intel’s factories to produce chips for other companies, including rivals. It has also involved accepting a more comprehensive range of processors from other firms, such as Arm.
Intel has a long history with ARM designs, which use a more straightforward instruction set than Intel’s chips. The company first bought the rights to the designs in 1998, and they were incorporated into its microprocessors in 1999. Since then, the company has expanded its product line and made several acquisitions to become the dominant force in the world of microprocessors.
However, the two chip giants have been in a heated legal battle over patent licensing and other issues in recent months. The dispute has caused SoftBank and Arm to rethink their IPO plans, which had been aimed at listing the company on the London Stock Exchange and Nasdaq.
The decision to move forward with a US listing on the NASDAQ may be an attempt to win over Intel and other investors. The companies will likely secure the ARM ticker, which the NYSE had previously reserved for itself. They may leverage their relationship with the exchange to win concessions on critical regulatory issues such as related-party transactions. This would allow Arm to avoid the need for explicit approval from shareholders every time it makes a transaction with one of its investments, as required by the London exchange. In addition, it will give SoftBank and Arm a more remarkable ability to diversify their shareholder base. The US listing could also make accessing the global capital markets easier, and the US exchange has an established reputation for quality and liquidity. This is particularly important for a stock likely to have a global trading volume of billions of dollars annually, as Arm’s will.
