$40bn takeover of UK chip designer Arm Holdings raises ‘serious competition concerns’
The $40bn takeover of UK chip designer Arm Holdings by US tech giant Nvidia faces an in-depth probe after regulators found the deal could weaken rivals and stifle innovation.
Britain’s Competition and Markets Authority (CMA) said it could ultimately mean more expensive or lower quality products in cutting edge technologies.
These include fields such as gaming, data centres, the “internet of things” – the use of electronic devices connected to the internet such as smart speakers – and self-driving cars.
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UK government ‘should block’ Arm’s sale to Nvidia
The CMA said undertakings offered by Nvidia about the way the business is run could not allay its “serious competition concerns” and that the deal should be more closely examined in a “phase two” investigation.
It said it had worked with other competition authorities around the world to examine the impact of the takeover of Arm, which licenses its designs to most of the global semiconductor industry with customers including Apple, Samsung, Intel and Qualcomm.
The 180 billion chips sold based on its technology are used in products ranging from smartphones to toasters.
Arm’s customers include companies that are rivals of Nvidia in the supply of semiconductor chips and related products.
It estimates that 70% of the world engages with its technology, the CMA’s report said.
The UK-based company has been put up for sale by current owner Softbank, the Japanese conglomerate, which agreed a deal with Nvidia last September.
SoftBank has agreed to sell Arm Holdings
The CMA was asked, alongside its initial look at competition concerns, to investigate any UK national security implications arising from the deal.
It sent its findings last month to Oliver Dowden, secretary of state for digital, culture, media and sport (DCMS), but details are only now being published.
Mr Dowden must make a formal decision on proceeding to the next stage of the probe.
CMA chief executive Andrea Coscelli said: “We’re concerned that Nvidia controlling Arm could create real problems for Nvidia’s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets.
“This could end up with consumers missing out on new products, or prices going up.
“The chip technology industry is worth billions and is vital to products that businesses and consumers rely on every day.
“This includes the critical data processing and datacentre technology that supports digital businesses across the economy, and the future development of artificial intelligence technologies that will be important to growth industries like robotics and self-driving cars.”
Nvidia said in a statement: “We look forward to the opportunity to address the CMA’s initial views and resolve any concerns the government may have.
“We remain confident that this transaction will be beneficial to Arm, its licensees, competition, and the UK.”
Nvidia has previously said that Arm would remain based in Cambridge and its site expanded
A DCMS spokesperson said: “We have received the CMA’s phase one report and the digital secretary will make a decision on whether to proceed to the next phase of the investigation in due course.”
One of the world’s largest investment firms has waded into the fight over the future of Thames Water, the water utility which is racing to stay afloat.
Sky News has learnt that KKR is in talks with Thames Water and its advisers about participating in a £3bn share sale which forms part of a wider recapitalisation plan.
City sources said this weekend that KKR, which has more than $550bn of assets under management, was among a handful of parties which had accessed a data room for potential investors.
Rothschild, the investment bank, is running a process to raise around £3bn from the sale of an equity stake in Thames Water, which is grappling with a debt mountain of as much as £19bn.
Other investors which have expressed interest in acquiring newly issued shares in the water company include Carlyle and Castle Water, the latter of which is controlled by Graham Edwards, the Conservative Party treasurer.
Global Infrastructure Partners, which is owned by BlackRock, Brookfield and Isquared are also reported to have lodged an interest, although sources said that the latter two were unlikely to play any further role in the process.
The crisis at Thames Water is presenting Sir Keir Starmer’s administration with a challenge as the debt-laden company attempts to avert temporary nationalisation.
Insiders said that KKR was “a serious player” in the equity process being run by Thames Water, although its outcome hinges on a final determination by Ofwat, the industry regulator, which is due by January at the latest.
Thames Water – and other suppliers across Britain – wants to hike bills and is demanding leniency from Ofwat on fines for past transgressions.
One obstacle to KKR buying a big stake in Thames Water, which has more than 15m customers, may be its 25% holding in Northumbrian Water.
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Under Ofwat’s mergers regime, the Competition and Markets Authority would need to review the deal, although there would not be an automatic prohibition.
The share sale process is being run in parallel to an attempt to raise up to £3bn in debt financing from hedge funds and other investors.
A battle has broken out between the holders of Thames Water’s class A bonds, which account for the bulk of its borrowings, and its riskier class B debt.
Both sets of bondholders have submitted proposals to the company, with the class A’s arguing that theirs is more certain and the class B’s arguing that theirs will save the company £380m or more in fees and interest over a 12-month period.
Thames Water has already endorsed the class A group’s offer, with an initial £1.5bn of funding to be delivered immediately.
The class A bondholders are now trying to secure backing for their proposal within the next fortnight.
Their group, which includes the American hedge funds Elliott Advisers and Silverpoint, would earn in the region of £650m during the first year of the financing.
One area of controversy is likely to be any incentive plan for Thames Water bosses, led by chief executive Chris Weston, as part of a deal to give the company a stay of execution.
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September: Thames Water boss says he can ‘save’ company
Last month, the environment secretary, Steve Reed, established an independent review of the industry that will look at far-reaching reforms.
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It was unclear this weekend which of KKR’s funds was participating in the Thames Water equity-raise.
The firm owns John Laing, an infrastructure investor, which it took private in 2021.
It has also owned South Staffordshire, another water company, selling its 75% interest in 2018.
KKR declined to comment.
The business secretary will next week hold talks with dozens of private sector bosses as the government contends with a significant corporate backlash to Labour’s first fiscal event in nearly 15 years.
Sky News has learnt that executives have been invited to join a conference call on Monday with Jonathan Reynolds, in what will represent his first meaningful engagement with employers since Wednesday’s budget statement.
Rachel Reeves, the chancellor, unsettled financial markets with plans for billions of pounds in extra borrowing, and unnerved business leaders by saying she would raise an additional £25bn annually by hiking their national insurance contributions.
An increase in employer NICs had been trailed by officials in advance of the budget, but the lowering of the threshold to just £5,000 has triggered forecasts of a wave of redundancies and even insolvencies across labour-intensive industries.
Sectors such as retail and hospitality, which employ substantial numbers of part-time workers, have been particularly vocal in their condemnation of the move.
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On Friday, the Financial Times published comments made by the chief executive of Barclays in which he defended Ms Reeves.
“I think they’ve done an admirable job of balancing spending, borrowing and taxation in order to drive the fundamental objective of growth,” CS Venkatakrishnan said.
His was a rare voice among prominent business figures in backing the chancellor, however, with many questioning whether the government had a meaningful plan to grow the economy.
Mr Reynolds held a similar call with business leaders within days of general election victory, and over 100 bosses are understood to have been invited to Monday’s discussion.
A spokesman for the Department for Business and Trade declined to comment ahead of Monday’s call.
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