Arm targets valuation of up to $52bn in IPO

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Arm plans to price its initial public offering at between $47 and $51 a share, according to an updated filing on Tuesday, raising up to $4.9bn for its current owner SoftBank and valuing the UK-based chip designer at up to $52bn.

Cornerstone investors, including Apple, Google, Nvidia, Samsung, Intel and TSMC, have indicated they plan to purchase up to $735mn worth of Arm shares at the IPO price, the company said.

Tuesday’s filing also disclosed that Apple and Arm have signed a new “long-term agreement” that ensures the iPhone maker will be able to develop processors based on Arm’s designs “beyond 2040”. Apple is one of Arm’s largest and longest-standing customers after it helped found the company as part of a joint venture in 1990.

SoftBank paid $32bn to acquire Arm in 2016 but its latest target is below the $64bn valuation implied less than a month ago in a transaction with its own Vision Fund, the $100bn Saudi-backed investment vehicle that the Japanese conglomerate manages.

SoftBank will still own 90.6 per cent of the company following the IPO, which is expected to be completed next week. The companies will begin their roadshow pitching the float, expected to be one of this year’s biggest, to investors in New York on Tuesday.

Also among the 10 cornerstone investors, who were named for the first time on Tuesday, are chipmakers AMD and MediaTek, as well as Cadence and Synopsys, which provide tools for chip design.

Qualcomm, one of the world’s largest mobile chipmakers and an important Arm customer, was not listed among the strategic backers, at a time when the two companies are locked in litigation over intellectual property licensing issues.

Ahead of Tuesday’s price range publication, some fund managers had expressed scepticism that SoftBank would be able to persuade investors to pay as much as $50bn for a company that reported flat revenues and falling profits in the run-up to the IPO.

James Anderson, one of Britain’s best-known tech investors, said Arm had “missed quite a lot of opportunities” since SoftBank’s takeover, such as faster growth in cloud computing. That could make it “more challenging than they thought” to achieve its desired valuation, despite Arm’s strength in the smartphone market, he said.

“It’s not clear that Arm is a critical player in most of the areas of expansion,” Anderson added. “I don’t see it as having a particular area of strength in AI-type developments.”

Barclays, Goldman Sachs, JPMorgan Chase and Mizuho are leading a consortium of 28 underwriters for the IPO. Raine Group — a boutique investment bank with ties to SoftBank and whose co-founder Jeffrey Sine sits on Arm’s board — is acting as lead adviser on the deal.