Is SoftBank’s Arm Holdings takeover bid a vote of confidence in post-Brexit Britain?

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SoftBank's chief executive and Arm's chairman (Source: Getty)

Helal Miah, investment research analyst at The Share Centre, says Yes.

We believe the SoftBank takeover bid should provide investors and the market with a sense of optimism in what is a subdued post-Brexit market. SoftBank has stated that Arm will remain an independent business within its portfolio and, most importantly from a vote of confidence point of view, it will be keeping its headquarters in Cambridge with the existing management in place. It also aims to double the UK employee headcount over the next five years and to increase its international employee headcount. The timing of the deal will undoubtedly get a lot of attention. Part of the attraction of buying now could be because of sterling’s significant depreciation since Brexit while the yen has been gaining – although SoftBank’s chief executive has been quick to deny that the deal has been influenced by this. The move will also be a test for new Prime Minister Theresa May, who has suggested that she will take a more protectionist stance on foreign companies taking over British companies.

Laith Khalaf, senior analyst at Hargreaves Lansdown, says No.

Arm may be listed in the UK and have its headquarters in Cambridge, but the company earns less than 1 per cent of its revenues from the domestic economy. Its microchips find their way into devices which are distributed to a global audience, and so Arm makes dollars, yen and euros rather than pounds and pence. The share price has risen sharply as a result of the fall in sterling following the referendum and, as of Friday, the company actually cost more in Japanese yen, the home currency of SoftBank, than it did on the day of the EU referendum vote. This takeover is a vote of confidence in British ingenuity and speaks volumes of the international reach of the FTSE, but it says nothing about the UK economy. Likewise, in terms of broader M&A activity, the fall in sterling may well attract more foreign buyers for UK companies where the share price hasn’t responded in kind. This deal, however, isn’t the bellwether.

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