ALEX BRUMMER: Pledge to keep Arm in the UK in doubt as Softbank tries to offload smart chip pioneer to Nvidia
Business Secretary Alok Sharma and the City referee the Takeover Panel need to keep an eagle eye on Softbank’s efforts to offload Cambridge-based smart chip pioneer Arm Holdings to US tech outfit Nvidia.
When Softbank’s wheeler-dealer Japanese boss Masayoshi Son spent £24million buying Arm in July 2016 he made a series of binding commitments to the newly installed government of Theresa May designed to assuage concern that Britain’s most valuable tech enterprise would be undermined, or even worse destroyed, by uncaring foreign ownership.
Under a deal agreed by Downing Street to fast track the sale and limit political objections, Softbank promised that over a period of five years it would double the size of Arm’s workforce in the UK and increase the number of employees overseas.
Pledge: Softbank boss Masayoshi Son promised that over a period of five years it would double the size of Arm’s workforce in the UK and increase the number of employees overseas
The Japanese firm also pledged to keep Arm’s global HQ in Britain and to ensure that the ratio of skilled tech employees to the rest of the workforce would be maintained.
Monitoring these binding commitments has been a nightmare. Softbank’s ownership of Arm was weakened when it hived off the company into its Vision Fund and proceeded to sell 25 per cent to Saudi Arabia and brought in other outside investors.
Even more disturbing was the sale of the majority of Arm’s China subsidiary, responsible for 20 per cent of group profits, to Chinese investors.
The result has been a bare knuckle board fight as Beijing has sought to install regime-friendly directors.
Most recently, as a prelude to an Arm disposal, Son has hived off two offshoots to other enterprises in his empire.
Such inter-company transactions are generally frowned upon in governance circles especially when the sums involved are obscured.
In spite of accumulating huge wealth from his early backing of China’s Alibaba internet sensation, Son lost his magic touch with blind backing for WeWork which came close to collapse.
To recoup losses, Son is engaged in a big sell-off of investments, including Arm.
The initial intention was a flotation, and in what would have been a snub to the London Stock Exchange it looked as if New York was likely to win the mandate.
The favoured route now is a trade sale to gaming chip specialist Nvidia, based in New York but with big California operations.
It is unclear whether the stipulations in terms of jobs and HQ imposed on Softbank at the time of the Arm purchase would survive in a £25billion offload.
As worrying is that the commitments made by Softbank run out in July 2021. The mismatch between the time scale it takes to develop complex technology, such as software incorporated in a microchip, and the ease with which companies are bought and sold in Anglo-Saxon capitalism could not be greater.
Sharma’s predecessor at the Department for Business, Energy and Industrial Strategy, Andrea Leadsom, made a big error when she refused to block the sale of aerospace pioneer Cobham.
Boris Johnson’s government is seeking to recover British-owned satellite skills, some of which were present within Cobham.
Sharma should intervene immediately to ensure the Softbank promises made in 2016 are honoured, and should seek an extension of the jobs and HQ promises from any new owner.
Anything short of that would be a betrayal of the Government’s plans to fire up R&D and the white heat of UK technology.
Comeback kid
The rambunctious return of founder Julian Dunkerton to fashion outfit Superdry in April 2019 looked fraught with danger.
But at a moment when so many fashion chains have tumbled into insolvency as Covid-19 hastened their demise, Superdry is showing resilience.
Admittedly sales fell by 24 per cent in the quarter ending on July 25, but given this was the period when the pandemic was at is most savage this is not a bad outcome.
The quirky firm restricted sales losses with the help of a 93.2 per cent uplift in online purchases. It also managed to put in place a £70million new credit facility with the help of HSBC. Investors piled back in and the shares soared 20 per cent.
Yatta! (We did it).
Northern lights
Sheffield-based developer Henry Boot is not giving up on city centres. It has just spent £10million on a redevelopment property in the up and coming St John’s area of Manchester.
It plans to redevelop the soon-to-relocate Manchester College site into 170,000 sq ft of commercial space.
Levelling up…