SoftBank's ARM cedes control of China ops to consortium for $775 million

TOKYO/HONG KONG (Reuters) - British chipmaker Arm Holdings, a unit of SoftBank Group Corp, will cede control of its Chinese business to a group of local investors in a $775 million deal.

FILE PHOTO: Shop employees of SoftBank Corp work outside its branch in Tokyo, Japan, August 6, 2015. REUTERS/Yuya Shino/File Photo

Arm will be selling the 51 percent of Arm Technology China to a consortium led by Hou An Innovation Fund, which is jointly managed by ARM and Chinese private equity firm Hopu Investments, a source close to the deal told Reuters.

The chipmaker will then form a joint venture (JV) with the consortium, the source added.

The deal will help boost opportunities for Arm in China, SoftBank said in a statement on Tuesday.

“Arm believes this joint venture, which will license Arm semiconductor technology to Chinese companies and locally develop Arm technology in China, will expand Arm’s opportunities in the Chinese market,” SoftBank said.

According to the source, the consortium led by Hou An will be a controlling shareholder in the JV.

Backers of Hou An include sovereign wealth fund China Investment Corporation, Silk Road Fund, Singapore’s Temasek Holdings [TEM.UL], Shenzhen’s Shum Yip Group and Hopu, according to China’s Ministry of Science and Technology.

Arm will, however, continue to get a significant proportion of all license, royalty, software and services revenue earned by Arm China’s licensing of its chips, SoftBank said.

Arm’s China semiconductor technology IP business accounted for about a fifth of its revenue in the year ended March 2018.

SoftBank acquired ARM, Britain’s most valuable technology company, for $32 billion in 2016.

The Nikkei newspaper reported last month that Arm was planning to sign over control of its Chinese operations to a new JV involving itself and Chinese partners.

(This version of the story deletes erroneous reference to “all-equity deal” in penultimate paragraph. The same error appeared in previous stories.)

Reporting by Sam Nussey and Julie Zhu; Editing by Sayantani Ghosh and Himani Sarkar