SoftBank to retain majority stake in Arm after IPO

SoftBank Group Corp. expects to retain a controlling stake in Arm Ltd. after the planned initial public offering of the chip business, selling a smaller portion than originally expected, according to people familiar with the matter.

SoftBank opted for an IPO of Arm, which it acquired in 2016, after a plan to sell the business to Nvidia Corp. collapsed earlier this year. SoftBank has decided that selling a smaller portion of Arm now, given the current slump in chip stocks, provides the opportunity to get a higher valuation for the remainder later, according to one of the people, who asked not to be identified because the plan isn’t yet public.

SoftBank’s raising of an $8 billion term loan — secured with shares of Arm — also has provided it with enough financial leeway to hold onto a bigger portion of the company and wait for better market conditions, said the people. The IPO will likely happen in the first quarter of next year, they said, but the size and timing of the offering could change.

Arm sells and licenses technology that’s used by semiconductors in everything from smartphones to super computers. The pervasiveness of its products has made its planned IPO a closely watched event in the $550 billion chip industry.

Tokyo-based SoftBank is seeking a valuation of at least $60 billion for Arm, Bloomberg has reported. It’s aiming for a higher amount than it would have gotten from its unsuccessful sale of the chip designer to Nvidia.

JPMorgan Chase & Co., Barclays Plc, Banco Santander SA, BNP Paribas SA, Credit Agricole Corporate and Investment Bank and Goldman Sachs Group Inc. are among the 11 lenders that SoftBank has lined up for the $8 billion term loan secured by Arm shares, the Japanese company confirmed earlier this month.

Chief Executive Officer Masayoshi Son acquired Arm for about $32 billion and gave it the resources to go on a hiring spree, aiming to crack new markets such as the server chips used in data centers.

While chip demand and industry earnings continue to surge, investors have increasingly turned away from such stocks this year. There’s concern that shortages of the electronic components will transition into a glut as demand plateaus and more production is brought on line.

The Philadelphia Stock Exchange Semiconductor Index has lost 22% this year, a worse performance than that of the S&P 500 and other benchmarks. Prior to that pullback, the chip index had more than tripled since 2017. Bloomberg