Lee Jae-yong and Son Jeong-ui Formalize ARM Acquisition Talks [Semiconductor M&A]

① Chairman Sohn to Meet Vice Chairman Lee During Next Month's Visit to Korea
Samsung Electronics Vice Chairman Lee Jae-yong Unusually Mentions M&A
A Strategic Move to Achieve 'New Samsung' Goals?

[Asia Economy Reporter Park Sun-mi] Masayoshi Son, chairman of SoftBank, will visit Korea next month to discuss the acquisition and merger (M&A) of the UK semiconductor intellectual property (IP) company ARM with Samsung Electronics Vice Chairman Lee Jae-yong. Due to the recent sharp decline in the stock market, making it difficult to sell shares through ARM's initial public offering (IPO), it is expected that Chairman Son will propose Samsung Electronics, which has weaknesses in the semiconductor non-memory business, to participate in ARM shares to complement these weaknesses.

According to the semiconductor industry on the 26th, Chairman Son will visit Korea next month and meet with Vice Chairman Lee. The main agenda of the meeting is a strategic partnership between Samsung Electronics and ARM. This will be Chairman Son's first visit to Korea in three years, and Vice Chairman Lee also revealed that there may be an ARM acquisition proposal as part of Chairman Son's visit schedule and purpose.

SoftBank, which acquired ARM for $32 billion in 2016, attempted to sell it to the US company Nvidia in 2019 but was blocked by antitrust regulatory barriers, causing the sale to fall through. They then shifted direction to selling shares through an IPO in the stock market. However, with the recent global stock market plunge, the IPO market has cooled, making it urgent for SoftBank to engage with companies interested in the ARM acquisition. Currently, the Philadelphia Semiconductor Index has fallen more than 30% since the beginning of the year.

In the financial market, it is expected that Chairman Son will visit Korea next month and request Samsung Electronics to join a consortium to acquire ARM at a slightly lower price before the ARM IPO proceeds next year. To include various companies in the consortium, a mediator is needed, and Chairman Son is directly playing that role, which is also why the meeting with Vice Chairman Lee was scheduled.

For Samsung Electronics, which is pouring massive investments into the semiconductor non-memory sector to catch up with the world's No. 1 foundry company TSMC, acquiring ARM shares could provide a strategic solution. However, the acquisition price and method remain issues.

The market value of ARM being discussed ranges from 50 trillion to 70 trillion won, with some even expecting up to 100 trillion won. When Nvidia was pursuing the acquisition of ARM, the acquisition price was around 54 trillion won, but as more global companies have shown interest, the valuation has surged. At the meeting between Chairman Son and Vice Chairman Lee next month, how much of a discount is offered on the ARM acquisition price is expected to significantly influence Samsung's decision to participate in the share acquisition.

From Samsung's perspective, since ARM's valuation is high and antitrust issues make it likely that regulatory authorities in various countries will oppose the M&A, it is more advantageous to approach the acquisition by sharing shares with multiple companies in a consortium rather than acquiring ARM alone. However, it must be considered whether the acquisition effect can be fully realized with only partial share participation, and if it is ineffective, Samsung may choose not to participate in the acquisition battle.

A semiconductor industry official said, "ARM holds about 90% of the mobile semiconductor IP market, so the effect Samsung could gain from acquiring ARM alone is significant," adding, "However, if it is a strategic share participation in the form of a consortium sharing minority shares with other companies, it will be difficult to achieve the desired effect, so a cautious approach is inevitable."