The boards of both SoftBank and ARM have unanimously recommended the proposed deal to buy out 100% of ARM and turn the company into a wholly-owned SoftBank subsidiary.
The proposed buyout of UK-based ARM is the third largest proposed corporate merger of the year, and the first major deal in the UK since the Brexit vote, which has pushed down the value of the British pound to make the prospect more enticing for SoftBank.
ARM's core business of designing chips for mobile devices alone does not justify the high purchase price, which is more than 70 times the company's net earnings for 2015. The company generated a mere $1.5 billion in revenue last year.
But to counter slowing smartphone sales, ARM has been seeking to diversify into other sectors by designing chips for IoT devices, and this is where SoftBank's interest in the company lies.
Speaking at a press conference announcing the proposed merger, SoftBank CEO Masayoshi Son said the IoT is expected to be the “biggest paradigm shift in human history,” and that the investment marks a move to enter at the ground floor of this shift.
Presentation materials prepared for the deal indicate that 14.8 billion ARM-powered SoCs shipped in 2015. The company is particularly targeting the consumer electronics, enterprise infrastructure, automotive and embedded intelligence segments.
The deal still requires approval from ARM shareholders and English courts, but subject to these approvals is expected to close in the current calendar quarter.