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Will Nvidia's Proposed Acquisition of ARM Go Through?

By Rachel Warren, Travis Hoium, and Toby Bordelon – Updated Dec 9, 2021 at 6:01PM

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The company has faced a flurry of regulatory roadblocks.

Back in September 2020, Nvidia (NVDA 2.73%) announced that it would be acquiring U.K. chip company ARM in a $40 billion deal. Since that time, the company has faced numerous impediments to completing the acquisition, and hopes of the deal going through seem to be fading with each passing day. In this segment of Backstage Pass, recorded on Nov. 19, Fool contributors Toby Bordelon and Travis Hoium discuss recent developments investors should know. 

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Toby Bordelon: On that regulatory note, I want to give a quick update on what's going on with Nvidia and Arm. There's some more news out about this. [laughs] I don't know, guys. A couple of days ago, I saw that the Competition and Market Authority, the CMA, the UK's version of the Justice Department and the FTC [Federal Trade Commission].

They're starting a phase 2 investigation of Nvidia's proposed ARM buyout. They finished their phase 1 investigation, which recommended a phase 2. The phase 2 is starting. It takes 24 weeks for this to complete.

Earlier on, the CEO of Nvidia's was like "We're going to get this done by March." If you count out, we get to the first week of May, I think, that march timeline is busted for sure now. It's just not happening. This deal is dragging on longer than Nvidia hoped when they announced it. The E.U. is doing a separate investigation.

That's going to take some time. Yesterday, I saw an article where the FTC has expressed concerns. Nothing formal that we're aware has started yet, and Nvidia says we are in discussion. They said on their earnings call, we're in discussion with the FTC about their concerns to see how we can address some issues.

And then we got China. That formal process has still not yet started that we are aware of, but it's going to take a few months, whenever they actually start to make a formal investigation here.

Bottom line for investors is this deal is now under a lot of scrutiny. Four separate regulatory agencies that we are aware of in four jurisdictions are at least looking into this. Some of them haven't started necessarily a formal process yet. It's certainly not going to get done on the original time frame, that is for sure. I have my doubts if it's going to get done at all, and I look at all these regulatory agencies saying what they're saying, I almost wonder if nobody really wants to kill it, but they all want it die.

They're hoping someone else kills it first, and they're just trying to see who is going to do this first for us. The FTC doesn't want to kill the deal. They're hoping the UK does it.

China, I think is holding back as they don't want to really jump in there, but they would prefer it not to happen, so they are waiting for someone else to say no, so they don't have to look like the bad guy. That's what it looks like to me is going on.

Someone who wants it, they all want it to not happen. But no one really has a handle on how to best say no. That's just my guess. If you had to say, do I think this deal is going to happen, I actually don't. I think it's going to be over. I don't think it's going to get done based on what I'm seeing right now.

We'll see. We got at least till 24 weeks for U.K., but I got my doubts. Do you have any quick thoughts in the minute we have left on this?

Travis Hoium: We talked about this last week and I think that's right. Now, Nvidia's so big and we've got this, like [Fool contributor] Rachel [Warren] said, the Facebook problem where regulators are just not going to be excited about them acquiring more land in the space.

Toby Bordelon: It seems like every week, we get an additional bit of news on this, and it's not favorable for Nvidia. It's always someone else is looking at it or someone else this looking at this more. It's never, "Concerns addressed, we're good to go." But Nvidia's, despite them in their earnings call saying we're talking to the FTC, the stock still went up.

I'm thinking maybe the market is now moving beyond this and is thinking, it doesn't even matter if this doesn't happen. We're just going to move on, and I think maybe at some point Nvidia just makes that call and we're done. We need to move on.

Travis Hoium You got to get back to the focus. At some point, both companies have got to say, this has been long enough.

Toby Bordelon: Yeah, I think that's right.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Rachel Warren has no position in any of the stocks mentioned. Toby Bordelon has no position in any of the stocks mentioned. Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Meta Platforms, Inc. and Nvidia. The Motley Fool has a disclosure policy.

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