U.S. sues to block Nvidia’s proposed takeover of Arm Holdings

The Department of Justice has sued to block Nvidia’s proposed takeover of Arm Holdings, saying that the deal would hand a massive unfair advantage to Nvidia.

In a lawsuit filed on Thursday in the Eastern District of Texas, the Department of Justice said it would attempt to block Nvidia’s takeover of Arm, because it would give Nvidia “unprecedented” market power. The Justice Department brought this challenge after Arm — the world’s leading processor designer — rejected an initial offer of $32 a share by Nvidia in October 2017.

At the time, Arm argued that the price was “grossly inadequate” and claimed that Nvidia would hold only 5 percent of the microchip market if the deal went through. The $27.9 billion deal would make Arm’s top shareholder, SoftBank, Nvidia’s largest single investor.

“Nvidia’s proposed takeover of Arm puts a small U.K. company at the helm of the industry’s leading platform manufacturer and the only other processor designer in the world,” said Ross Feinstein, chief of the antitrust division at the Justice Department. “This jeopardizes the hundreds of billions of dollars in electronic commerce transacted through Arm chips each year, since the vast majority of computing devices are powered by Arm chips.”

At the time of the initial complaint filed last year, Arm’s CEO stated that, “we don’t expect this to have an impact on our operations in 2017 or beyond,” and cited the long-standing cooperation between the two companies.

Nvidia disagreed, saying that it would need to raise Arm’s price “from its currently depressed level” in order to conclude a deal.

Many have questioned the wisdom of the deal, seeing it as a direct threat to AMD, Arm’s rival.

In a blog post, following the federal government’s suit to block the deal, Arm said that if it fails to win the antitrust battle with Nvidia, it would consider all options for its future. “These include examining all alternatives for the UK-based company’s future, including undertaking a possible multi-billion pound cash rights issue or a rights issue of a competing technology company,” Arm said.

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