ARM China conflict spells more trouble for ARM-NVIDIA deal

NVIDIA's most audacious move was the $40 billion takeover bid for ARM. While NVIDIA CEO Jen-Hsun Huang remains confident that the acquisition will pass regulatory approval, more and more hurdles are appearing. FT reports a conflict with with ARM China's former CEO spells trouble for the deal.

As we wrote earlier this summer, ARM is entwined in a weird conflict with its Chinese subsidiary. Allen Wu was voted out as CEO of ARM China in June 2020 over conflicts of interest relating to his Alphatecture investment fund but he refuses to leave. Wu is the holder of key registration documents of ARM China, which he needs to give up to change the legal representative of ARM China.

Seeking Alpha reports Wu now controls 17 percent of the ARM China shares and four out of six of ARM China's shareholders. Wu claims he was wrongfully dismissed by the parent company and continues to be in charge of ARM China's day-to-day operations. The tension is an extra obstacle as NVIDIA needs approval from China's regulatory body to be able to takeover ARM.

Removing Wu, who continues to be in charge of Arm China’s day-to-day operations, is a a major obstacle to Nvidia’s deal. One person close to Arm China’s board said he rated the odds of success for the deal at “only 50-50”.

Eric Chen, the head of SoftBank Group's China operations, was put in charge of negotiating an exit for Mr. Wu. The discussions revolved around a potential payout of between $100M and $200M.