What: Shares of ARM Holdings plc (NASDAQ: ARMH) skyrocketed 41.3% Monday after the semiconductor specialist agreed to be acquired by Japan's SoftBank (OTC:SFTBF) in a $32 billion deal.
So what: The two companies have reached an agreement on the terms of a recommended acquisition by SoftBank of ARM Holdings for 1,700 pence per share in cash (roughly $67.28 per share), representing a premium of roughly 42.9% to ARM's Friday closing price of $47.08 per share, and 58.7% to its dollar-based volume-weighted average closing price over the three months prior to and including Friday's close. ARM shareholders still on the register of members of ARM as of the close of business on September 8, 2016 will receive an interim dividend of 3.78 pence per ARM share, payable on October 10, 2016, as well as any future dividends with a record date prior to the effective date of the acquistion.
Now what: Softbank also stated it not only intends to preserve ARM's existing organization -- including its senior management team, Cambridge headquarters, brand, partnership-based business model, and culture -- but also plans over the next five years to "at least double" its employee headcount in the U.K., and increase its headcount by an undisclosed number outside the U.K.
The acquisition will also be SoftBank's largest to date, and will be implemented through a court-sanctioned "scheme of arrangement" which must be approved by at least 75% of ARM shareholders by November 17, 2016. It is not subject to any antitrust or regulatory conditions.
"We have long admired ARM as a world renowned and highly respected technology company that is by some distance the market-leader in its field," added SoftBank CEO Masayoshi Son. "ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the 'Internet of Things.'"
Finally, ARM chairman Stuart Chambers confirmed the view of ARM's board that "this a compelling offer [...] which secures the delivery of future value today and in cash."
I tend to agree with that stance given both the healthy premium at which SoftBank is making the acquisition, as well as its pledge to significantly invest in ARM's business while keeping its structure and strategies intact. As it stands, unless waiting to sell would result in more favorable long-term capital gains tax treatment, I think ARM shareholders would be wise to take today's profits off the table and put them to work elsewhere.