As shareholders prepared to vote on SoftBank's £24 billion (€28bn) takeover of ARM, former City minister Lord Myners made a last minute plea for the Cambridge-based technology company to remain under British ownership.
“We are selling our winners,” he said, “and we are being left with companies which are either not globally successful or businesses which are controlled from overseas.”
His words went unheeded, however, and just hours later, shareholders in Britain’s most successful technology company gave their overwhelming approval to the £17-a-share, all cash bid from Japan. Friday will be the last day ARM shares are traded on the London stock market and the deal will be formally completed next Monday.
ARM is the closest Britain has to a global technology giant and the loss of its independence has raised fears over the future of Britain's technology industry. ARM chief executive Simon Segars sought to ease these concerns after yesterday's shareholder meeting, insisting: "We are not going anywhere. We are still going to be at the heart of British technology."
SoftBank has given a number of assurances over the future of ARM, whose microchip designs are used in the Apple iPhone and billions of other devices. It has pledged it will double ARM’s British workforce of around 1,700 over the next five years and keep its headquarters in Cambridge. It will also maintain its “unique culture and business model”.
As Myners pointed out, however, decisions on the future of the business will now be made in Tokyo rather than Cambridge. He dismissed the Japanese company’s promises as “not worth the paper they are written on”.
New takeover rules were brought in after Pfizer’s attempted takeover of AstraZeneca in 2014, making such pledges binding, although it’s not clear whether such promises are legally enforceable – and five years can be a very long time in the technology industry.
Government response
The takeover was warmly welcomed by Theresa May’s government when it was launched last month, just a few weeks after the Brexit vote. It was proof, the prime minister said, that Britain remained attractive to international investors despite the result of the referendum.
For Myners, though, the deal underlines the City’s failure to back British business. “This is evidence once again of the City’s predilection to sell at a premium, get out, don’t invest for the future, don’t back the British economy and don’t back Britain’s future.”
Such a takeover would never have been allowed to go ahead so swiftly in America, Germany, France, or, indeed, Japan, he believes. “There would be a question of national significance and public policy to determine whether we should sell.”
But the sale of ARM was inevitable once SoftBank delivered its terms, a knockout 43 per cent premium on the Cambridge company’s previous share price – and in cash.
The ARM board recommended the deal and urged shareholders to do the same; not that they needed much urging at £17 a share. The only thing that might have derailed the move was unrest from SoftBank’s own shareholders, who fear that it already has too much debt.
Its borrowings are a hefty £90 billion and its shares fell sharply immediately after the deal was announced.
Shareholder windfall
ARM shareholders are not the only winners – the deal has triggered windfalls in the Cambridge company's boardroom, with chief executive Segars and chief technology officer Mike Muller collecting £55 million between them. Employees at the group could also ultimately benefit to the tune of almost £400 million through share incentive schemes.
It has also been a hugely lucrative deal for the City, with fees for financial advisors and lenders running to just over £200 million. One can only imagine what they would have charged had the takeover been hostile rather than an agreed deal. Include taxes, and the final bill jumps to £350 million.
The firms sharing in the fees bonanza include Goldman Sachs, Lazards, UBS and Barclays, along with law firms Slaughter & May and Freshfields. The bill for financial public relations advice alone is put at £6 million, shared between Brunswick and Finsbury.
The biggest beneficiary, though, is the UK government, which will receive £120 million in stamp duty as a result of the deal. Not enough to make much of a dent in the deficit but welcome nonetheless.
There are plenty of winners in the ARM deal, but will Europe’s biggest technology takeover be good for Britain, as the prime minister believes, and for ARM employees? That will largely depend on whether its new Japanese owner keeps its promises – and sorts out its own debt mountain.
Fiona Walsh is business editor of theguardian.com
