The U.S. Federal Trade Commission (FTC) is initiating an in-depth investigation into
NVIDIA
’s
NVDA
proposed take-over deal of Arm Holdings from Softbank Corporation,
Bloomberg
reported last Friday citing people familiar with the matter.
On Sep 13, 2020, NVIDIA inked an agreement to acquire Arm from its existing owner, Softbank Group, in a cash-and-stock deal worth $40 billion. The company aims to integrate its artificial intelligence (AI) computing platform with Arm’s expertise in a bid to create a premier computing entity.
However, the deal has caught the attention of the U.S. competition regulator, FTC, which is investigating the proposed takeover on competition grounds. Bloomberg noted that FTC has sought more detailed information about the transaction from all three companies. It has also asked other relevant companies that might provide information regarding this deal.
FTC is not the only regulator which is scrutinizing the NVIDIA-Arm transaction. Last month, the U.K.’s competition regulator, Competition and Markets Authority (CMA), also initiated a probe over the deal.
The CMA will ensure that the deal does not result in more expensive or low-quality products for consumers. The agency will consider whether or not Arm will withdraw, increase prices or provide lower-quality Intellectual Property (IP) licensing services to NVIDIA’s competitors.
European regulators are also gearing up for their own investigation. Moreover, the deal will likely face hurdles from the Chinese anti-trust agencies.
Other Tech Giants Opposing the Deal
Additionally, several tech companies, including
Alphabet
’s
GOOGL
Google,
Microsoft
MSFT
and
Qualcomm
QCOM
, have opposed the transaction and asked the U.S. anti-trust regulators to intervene. According to Bloomberg, “At least one of the companies wants the deal killed.”
They are arguing that the acquisition would provide NVIDIA control over Arm’s IP rights, which licenses chip designs and related software to whoever is willing to pay for them, including rivals to one another. The companies are concerned that NVIDIA might limit the access to Arm’s technology for its rivals or raise the prices, per Bloomberg.
Arm’s Acquisition Synergies to NVIDIA
We believe the Arm acquisition would be a perfect fit for NVIDIA. The transaction will help the graphic chip maker enhance its capabilities in chip designing and foray into newer business segments.
NVIDIA intends to integrate its leading AI computing platform with Arm’s expertise in a bid to create a premier computing entity, and expand across large and high-growth markets.
NVIDIA had earlier stated that the transaction would be immediately accretive to non-GAAP gross margin and non-GAAP earnings per share post the transaction’s closure.
Nonetheless, looking at the protest by the companies, it would be a difficult task for NVIDIA to win an approval for Arm’s acquisition.
NVIDIA currently carries a Zacks Rank #4 (Sell).
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