Fundraisings and takeovers typically require shareholder approval before they can proceed. Investors can keep up to date with corporate activity among UK companies by following the links in the tables below.
CMA pitches in on ARM/Nvidia
Nvidia’s (NASDAQ: NVDA) $40bn (£29bn) pursuit of ARM Holdings took another twist as the Competition and Market Authority (CMA) found grounds to press for a deeper investigation into the deal in its report to the Department of Culture Media and Sport. The Secretary of State, Robert Dowden, who was appointed to the post in February last year, will now decide whether to hand the file back to the CMA to launch the investigation on public interest and competition grounds.
The facts that the stakes are so high for all concerned merely underlines the tremendous value of the IP that ARM Holdings has in its low-powered, but highly effective range of microprocessors – ARM chips power tens of millions of smartphones, are a key component in the “internet of things,” and are increasingly important in electric vehicle manufacturing and driverless car technology. If the deal were to go through unhindered, then Softbank, ARM’s current owners, would clear a roughly £6bn profit on the £24bn it paid for ARM in 2016.
The fact that the basic ARM chip architecture started life in the humble BBC Acorn computer, which readers of a certain age will remember with fondness from their 1980s school days, underlines its status as one of the UK’s most desirable companies, as well as validating the high quality of the original development work.
There is no doubt that Nvidia faces an uphill battle to convince the regulators to give the takeover the green light. ARM chips are relied on by a host of other semi-conductor manufacturers and Nvidia already has a very dominant position in certain market segments. For example, in general processor units, which converts machine code into signals for a monitor, the company has an 81 per cent market share, according to the latest research.
Whatever the outcome of the competition inquiry, and a straight veto of the deal cannot be ruled out, it will not end the debate about where ARM goes from here. If it is decreed to be an issue of national significance for the UK, then that also makes it a largely unsellable asset for Softbank. The question then is will its dominance in certain areas begin to erode if it cannot access new funds or find another way to deploy its intellectual property? Like the competition inquiry, the jury is out. JH
No smoke without fire
The battle for Vectura (VEC), the UK-based pharma group that specialises in medical inhalers, is heating up.
Earlier this month, its board accepted a final offer of 165p per share from Philip Morris, valuing the company at £1.1bn. This was 10p higher than the rival bid from Carlyle Group, and a 60 per cent uplift on the 103p it was trading at before the private equity giant’s approach was first announced on May 26.
It values Vectura at 22.8-times last year’s operating profit before exceptional items and looks like an example of a strategic buyer outbidding a financial one.
For Philip Morris, Vectura fits with its “beyond nicotine” strategy, through which the Marlboro maker pledges to generate most revenues from sources other than cigarettes by 2025 and to become ‘smoke-free” in the UK by 2030.
It has attracted fierce criticism, though. Last week, the heads of 40 organisations led by lobbying group Tobacco-Free Portfolios urged shareholders to reject the offer, citing a range of business risks. These included the possibility of Vectura being cut off from government research grants and struggling to land new contracts, partnerships or employees if it is excluded by “reputable medical and scientific communities”. It argued that Philip Morris still makes more than 75 per cent of its money from selling cigarettes and just this month bid for a licence to run a tobacco factory in Egypt.
Philip Morris is lobbying hard for acceptance. Chief executive Jacek Olczak said in a recent Telegraph column that it was “puzzling” that anti-tobacco campaigners were denouncing its efforts to stop selling cigarettes. Vectura directors unanimously recommend that shareholders accept the offer. The shares are currently trading a fraction below the offer price at 163.6p, suggesting the market thinks it’s a done deal. Philip Morris already owns a 29.16 per cent stake and has until September 15 to secure a majority. Expect more hot air to be generated until then. MF