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SoftBank announces $31bn acquisition of UK chip designer ARM

TOKYO -- Japanese telecommunications company SoftBank Group has agreed to buy U.K. technology company ARM in a deal worth $31 billion (3.3 trillion yen), the company announced on Monday.

"We have long admired ARM as a world renowned and highly respected technology company that is by some distance the market-leader in its field," Masayoshi Son, CEO of SoftBank, said in a statement. "ARM will be an excellent strategic fit within the SoftBank Group as we invest to capture the very significant opportunities provided by the  'Internet of Things'," he added.

Stuart Chambers, Chairman of ARM said in the same statement: "It is the view of the board that this is a compelling offer for ARM shareholders, which secures the delivery of future value today and in cash... The board believes that by accessing all the resources that SoftBank has to offer, ARM will be able to further accelerate the use of ARM-based technology wherever computing happens."

ARM is a global leader in smartphone chip design. Some 15 billion chips based on its technology were shipped last year, nearly 3 billion more than the year before, according to the Financial Times. SoftBank intends to keep ARM's existing senior management team and its business model, as well as  maintain ARM's headquarters in the U.K. The Japanese company aims to at least double the employee headcount in the U.K. over the next five years.

Shares in ARM surged in opening trade in London on Monday, rising 45% to 17.25 pounds ($25). Japanese stock markets were closed for a public holiday on Monday.

Internet of Things, or IoT as it is widely known, was one of the fields which Son has identified as the next area of growth for SoftBank along with artificial intelligence, or AI. His enthusiasm for both IoT and AI was one of the reasons for him wanting to stay at the helm for "another five to ten years," which led him to part ways with former company president Nikesh Arora, who had hoped to take over the leading role in a few years' time.

SoftBank has accumulated 2 trillion yen ($18 billion) in cash in recent months through the unwinding of its stakes in Chinese e-commerce company Alibaba Group Holding, Japanese smartphone game developer GungHo Online Entertainment, and Finnish mobile game provider Supercell; speculation had been mounting as to what the Japanese company would do with that cash. SoftBank will pay 17 pounds in cash for each share in ARM, a 43% premium to its closing price last week, and has entered into a bridge loan agreement with Mizuho Bank for a maximum amount of 1 trillion yen to help  finance the deal. 

The deal comes just weeks after the U.K. voted to leave the European Union in a referendum, a decision which has led to doubts over the attractiveness of the country's business environment. But the fact that ARM earns much of its revenue in U.S. dollars made it better insulated from the impact of Brexit, while the near 30% fall in the British pound against the yen since the start of the year made the acquisition more attractive for SoftBank.

The deal between SoftBank and ARM follows the recent trend of U.K. companies being snapped up by foreign companies post-Brexit. An American unit of Chinese real estate  company Dalian Wanda Group recently announced a deal to buy U.K's Odeon & UCI Cinemas Group for $1.21 billion, while South African retail group Steinhoff International will acquire discount chain Poundland for $789 million, and U.S. media company News Corp is buying  radio company Wireless for $296 million.

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