The head of Nvidia has promised to make “legally binding” promises to the staff of Arm Holdings after a political row over the takeover of the Cambridge-based tech company.
Nvidia, the US-based chip company, announced a $40bn deal on Monday to buy the UK company from current owner SoftBank of Japan.
The group promised to keep the headquarters of Arm in Cambridge while growing its presence with a new artificial intelligence centre in the city.
But critics raised concerns because the company refused to offer any mechanism by which the pledges would be made watertight, saying instead that Arm’s headquarters would remain in Cambridge “for as long as Arm employees want to work in the UK”.
By contrast, SoftBank gave legally binding assurances when it bought the company in 2016 that the headquarters would stay in Cambridge and the UK workforce would double over five years. Those arrangements, which were thrashed out with the government after the deal, were legally binding under the UK’s Takeover Code.
The SoftBank pledges expire in September 2021, at which point — unless Nvidia makes fresh legally binding promises — its new owner would have a free hand over Arm’s future.
Jensen Huang, chief executive of Nvidia, has raised the prospect of similar commitments, telling the Financial Times in an interview: “We will of course enter legally binding documents with everybody.” However, he did not give details about the extent of those commitments.
Ed Miliband, shadow business secretary, said this week that the government needed to extract gold-plated promises from Nvidia that would be enforceable by the Takeover Panel.
Oliver Dowden, culture secretary, is still considering whether to announce a “call in” under which the Competition and Markets Authority would review the transaction to complete in September 2021. If he did so he would likely cite “national security” as a pretext given Arm’s role as a major supplier to the defence industry.
However there are no current powers for the CMA to force Nvidia to keep the Arm headquarters or a specific number of jobs in the UK.
Instead, experts believe the government will try to seek separate political commitments that would be legally binding.
The templates for that kind of arrangement are the Cobham-Advent deal and the original sale of Arm to SoftBank.
Advent last year made post-offer undertakings to the Takeover Panel to maintain Cobham’s headquarters in the UK for several of its businesses, continue the use of Cobham as a registered name in the UK and ringfence the level of R&D spend in the country.
Those pledges are enforceable by the panel under the Companies Act 2006.
“There are no legal powers to require this [keeping UK jobs and headquarters] either for the CMA or UK government itself,” said one senior lawyer.
“However, there are precedents for political-type commitments in effect being required and given to the Takeover Panel and the UK government and made legally binding. These are non-competition law related and non-public interest/national security related.”
The Takeover Code does not usually apply to private companies but can still apply to Arm because it has been listed in the UK within the past 10 years.
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