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Nvidia sinks after UK regulators say they will probe the firm's $40 billion takeover of British chipmaker Arm over national security concerns (NVDA)

Submitted by Tech Insider on April 19, 2021 - 2:55pm

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Nvidia stock sank as much as 4.2% on Monday after UK regulators said they will probe the firm's proposed $40 billion takeover of British chipmaker Arm over national security concerns.

In a Public Interest Intervention Notice (PIIN) published on Monday, Britain's Digital Secretary Oliver Dowden said he is intervening in the sale of Arm on national security grounds after considering advice from officials across the investment security community.

"Following careful consideration of the proposed takeover of Arm, I have today issued an intervention notice on national security grounds," Dowden said.

"As a next step and to help me gather the relevant information, the U.K.'s independent competition authority will now prepare a report on the implications of the transaction, which will help inform any further decisions," Dowden added.

The Competition and Markets Authority (CMA) will prepare a report for the Secretary of State by July 30 on the potential competition and national security implications of the proposed Arm transaction.

A spokesperson for Nvidia told CNBC: "We do not believe that this transaction poses any material national security issues. We will continue to work closely with the British authorities, as we have done since the announcement of this deal."

Andrea Coscelli, chief executive of the CMA, said of the move:

"We will work closely with other competition authorities around the world to carefully consider the impact of the deal and ensure that it doesn't ultimately result in consumers facing more expensive or lower quality products."

Nvidia had been set to pay Arm's owner, Japanese conglomerate SoftBank, $12 billion in cash and $21.5 billion in stock for the British chipmaker.

Nvidia was also planning to give $1.5 billion in equity to Arm employees in the transaction, while SoftBank was set to receive up to $5 billion of additional funds subject to specific financial performance targets by Arm.

Altogether the transaction was worth roughly $40 billion. 

Despite Nvidia's falling share prices after the news broke, the company's stock is still up roughly 20% in the last month and 113% over the past year.

Analysts are also mostly bullish on the stock. Nvidia boasts 90 "buy" ratings, eight "neutral" ratings, and just two "sell" ratings from analysts.

Shares of the semiconductor powerhouse traded down 3.67% as of 2:51 p.m. ET on Monday.

NVDA stock chart

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