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July 21, 2016

Could SoftBank’s debt derail £24.3bn ARM deal?

News: Japanese telecoms and technology group already has £86 billion of debt.

By Ellie Burns

The widely reported ARM acquisition by Japan’s SoftBank has been cast in doubt, with investors and analysts raising concerns about the £24.3 billion price of the deal and the increasing debt of the Japanese telecoms and technology group.

SoftBank already has £86 billion of debt, with Mitsushige Akino, the chief fund manager at Ichiyoshi Asset Management, telling Reuters: “A fresh acquisition is not what the market wants from SoftBank, it’s Mr Son’s style to keep expanding, but isn’t he stretching too much?”

Further concerns were raised by Atul Goyal, an analyst at Jefferies, who was reported by the Guardian as saying: “To us, the ARM acquisition announced yesterday [Monday] appears largely inconsistent with SoftBank’s investment strategy. It does not inspire much confidence and requires deeper review.”

However SoftBank founder Masayoshi Son dismissed concerns about the acquisition, saying at a London press conference that ““If the investors do not like it, they will sell. “I am the largest shareholder in SoftBank. I share the same interest as the other shareholders.”

The proposed deal has provoked strong reactions from those in the industry, as well as political figures using the deal to push a post-Brexit opinion. With new PM Theresa May issuing a statement backing the deal, Chancellor of the Exchequer Philip Hammond said it shows the UK remains attractive to foreign investment after Brexit. "Just three weeks after the referendum decision, it shows that Britain has lost none of its allure to international investors. 

"Britain is open for business – and open to foreign investment. Softbank's decision confirms that Britain remains one of the most attractive destinations globally for investors to create jobs and wealth."

However, not everyone saw the acquisition as a positive step for Vritish technology. Dr Gordon Sanghera, CEO at Oxford Nanopore Technologies, said: “Like many others, I believe the ARM takeover by a non-UK company is a sad day for British Technology.  Softbank’s commitment to double the number of UK jobs at ARM is of course positive, but history shows us that innovation and manufacturing jobs tend to drift away over 5-10 years following a foreign acquisition. The reality is that ARM will not be fully autonomous.”

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