SoftBank buys Vision Fund stake to value Arm at $64bn ahead of IPO

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SoftBank has bought a stake in UK chip designer Arm at a $64bn valuation, as the Japanese conglomerate takes full control of the Cambridge-based company and tries to set a floor for its stock price ahead of a listing that is expected next month.

The deal saw SoftBank buy the 25 per cent of Arm that it did not already own from the Vision Fund, the $100bn Saudi-backed vehicle that is managed by SoftBank itself.

According to people familiar with the transaction, SoftBank valued the Vision Fund’s 25 per cent stake at around $16bn, roughly double the price that the fund paid when it took the stake in 2017.

Led by Masayoshi Son, SoftBank bought Arm for $32bn in 2016 and is planning to list the company in New York. Initial paperwork for the listing is expected be made public on Monday, according to people close to the preparations.

SoftBank and the Vision Fund declined to comment on the deal, which was first reported by the Wall Street Journal.

The internal transaction provides a guaranteed payday for the Vision Fund’s investors, including Saudi Arabia’s and Abu Dhabi’s sovereign wealth funds, which invested alongside SoftBank to create the first of its ambitious tech funds in 2017.

It is a big win after a series of disappointments, including bad bets on companies such as WeWork and FTX. The Vision Fund laid off dozens of employees last year.

Moving the stake back to the SoftBank parent company dispels uncertainty for future Arm investors on if and when the Vision Fund would sell down its stake after the company had gone public.

People familiar with SoftBank’s thinking said the deal was an expression of its confidence in achieving a higher valuation for Arm in the initial public offering. The structure of its original transaction with the Vision Fund in 2017 put a ceiling of doubling its return on the $8bn deal, leaving it little upside if Arm was valued at more than $64bn in its IPO.

SoftBank, when reporting its latest financial results this month, indicated a $45bn fair-value assessment for Arm at the end of June, up around 13 per cent on the previous quarter.

But SoftBank is hoping it can convince public market investors, who have been starved of big new tech listings for 18 months, to pay more for a company whose intellectual property lies at the heart of the modern smartphone, as it looks for growth in the automotive, data centre and artificial intelligence sectors.