🍟The chips are down – $75bn takeover of British chip designer to be abandoned

M&A
$75bn takeover of British chip designer to be abandoned

What’s going on?
US tech giant Nvidia is reportedly ditching its $75bn purchase of British chip designer Arm after facing mounting regulator pressure.

Why is this important?

Arm designs rather than manufactures chips -  the essential components in the “brain” of every electronic device in the world. Its designs are core to most of the world’s smartphones and it's growing its presence in computing competing with the likes of Intel.

The takeover – that would be the largest ever in the sector - was announced back in September 2020 but has been heavily scrutinised by the competition authorities in the US, UK, EU, Australia and China. 

There were widespread concerns that a merger would allow Nvidia to limit chip supplies and increase prices to Arm customers like Google, Samsung and Microsoft.

Despite all the opposition Arm’s current owner, tech conglomerate Softbank, remained confident that the deal would go through. But last month the US regulator sued to block the transaction on grounds it would give Nvidia too much power and this could prove to be the final straw.

According to close sources, Nvidia has begun telling partners it plans to abandon the deal. Softbank is also reportedly looking into listing Arm on the stock market as an alternative to a sale.
 

ECONOMY
Oil hits $90 for first time since 2014

The eyes of the world remain focused on geopolitical tensions on the Russia-Ukraine border.

Increasing unrest and supply side concerns (with Russia being the second largest oil producer globally, behind only the US) led to the benchmark oil measure, Brent crude, jumping 2% to $90 a barrel yesterday. The first time in over seven years.

Both the UK and US are now considering imposing personal sanctions on Russian President Vladimir Putin should Russia invade Ukraine. Despite Russia having assembled more than 100,000 troops around Ukraine, Russia has accused the US and others of “escalating tensions” over the situation and denies planning to enter Ukraine at all. 

Oil prices have been on a rollercoaster throughout the pandemic, the plummet in global demand in 2020 saw prices drop as low as $20 a barrel. The resurgence in economic activity in the past year and tensions in Eastern Europe have led many analysts to predict $100 a barrel oil by the end of the year.

The increase is good news for oil companies who’ll profit from higher prices, Shell shares rose 6% and BP was up 4% on the day.

But consumers are likely to feel it at the pumps with changes in oil prices usually filtering through to petrol and diesel prices. It’s another strain on household incomes in addition to 30-year inflation, tax rises and slow wage growth feeding into the current cost of living crisis.