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NVIDIA's ARM Acquisition Is Facing Regulatory Hurdles

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The timeline will likely be extended for some interesting reasons.

Acquisitions are hard, especially when they are big. The announcement of NVIDIA (NVDA 4.28%) buying ARM Holdings from SoftBank (SFTB.Y 1.95%) is no exception. With these two global businesses getting together, regulators from around the world want their say. On a Fool Live episode recorded on June 16, Fool contributors Toby Bordelon, Brian Stoffel, and Brian Withers discuss what's going on with the process and whether it will close as scheduled in March 2022.

Toby Bordelon: Of course, we got the ARM acquisition that was announced last September. It's still in process, $40 billion deal. That's not huge relative to NVIDIA's overall market cap, but $40 billion, it's still a big deal here, so watch for that as that develops. But overall, a lot of positive developments. This company continues to grow and expand. That's good to see.

Brian Withers: Toby, glad you brought up the ARM acquisition. It seems like this thing's dragging on. You think it would have been closed by now? What is [that] they have to do to close this thing or is it dead in the water?

Toby Bordelon: Well, that's a good question. I would not say it's dead in the water, but there are some regulatory headwinds that have emerged with this. Initially, when they announced this back in September, they were saying March 2022 is their target for closure. Because they knew it's going to take a while to get these approvals. That's still a little ways away, but there are some issues here.

It has to get approval in the U.S., in the U.K., in the EU. Chinese regulators are saying they might look at this now. The Chinese problems are, that's a bit of a concern, because you've got the political fight between the U.S. and China over business and tech issues, that could come into play for this. There could be politics involved in this approval, not just straight-on-the-face business issues going on here. That's an issue.

Qualcomm also is stepping in, trying to muck this up. They announced a couple of days ago like, if it doesn't work out, then we'll invest in ARM. That's fine. Like in the sports context, we call that tampering. In the business context, totally fine. I guess you can do that.

There's a lot of play there. I don't think final consummation of the deal is certain at this point. I think March might be a little bit of wishful thinking. The deal allows them to extend the deadline to September of 2022. So if things are moving slowly, that's still a possibility. And the EU, they're big on their summer vacations in the EU, especially they didn't have a big one last year because of COVID, the EU is making noise about, well, I don't even know if we want to start looking to this until after August. So it's going to go slowly. I would not be surprised if they had to extend that deadline a little bit to account for everyone who wants to have their say. Keep an eye on that. We'll see how things develop.

Brian Stoffel: That's the hot take of the hour right there. [laughs] The EU's big on their summer vacations and they didn't get one last year.

Brian Withers: There we go. Awesome. Yeah, that was great insights on the regulatory hurdles there.

Brian Stoffel has no position in any of the stocks mentioned. Brian Withers has no position in any of the stocks mentioned. Toby Bordelon has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool recommends Softbank Group. The Motley Fool has a disclosure policy.

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NVIDIA Corporation Stock Quote
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