U.S. sues to block Nvidia merger with Arm, the largest semiconductor deal in history

Federal Trade Commission votes unanimously to block merger that official says 'would distort Arm's incentives in chip markets and allow the combined firm to unfairly undermine Nvidia's rivals'

The Federal Trade Commission sued to block Nvidia Corp.'s proposed $40 billion acquisition of Arm Ltd. on Thursday.

The FTC said in an announcement that Nvidia's (NVDA) "proposed vertical deal would give one of the largest chip companies control over the computing technology and designs that rival firms rely on to develop their own competing chips." Commissioners voted 4-0 to block the merger, and an administrative trial is set to begin in August 2022.

"Tomorrow's technologies depend on preserving today's competitive, cutting-edge chip markets," FTC Bureau of Competition Director Holly Vedova said in a statement. "This proposed deal would distort Arm's incentives in chip markets and allow the combined firm to unfairly undermine Nvidia's rivals."

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In a statement, an Nvidia spokesperson said: "As we move into this next step in the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition."

"Nvidia will invest in Arm's R&D, accelerate its road maps, and expand its offerings in ways that boost competition, create more opportunities for all Arm licensees and expand the Arm ecosystem," the statement continued. "Nvidia is committed to preserving Arm's open-licensing model and ensuring that its IP is available to all interested licensees, current and future."

Nvidia's proposal to acquire Arm from SoftBank Group Corp. has met with several headwinds since it was announced back in late 2020, and the company said in its last earnings report in mid-November it was working with the FTC to address concerns raised by the deal. The $40 billion deal, the largest in the history of the semiconductor sector, has also been targeted by European Union and U.K. regulators.

Nvidia Chief Financial Officer Colette Kress confirmed to MarketWatch in August that if the deal was not completed by September 2022, SoftBank would get to keep a $1.25 billion down payment as a breakup fee.

Nvidia shares were up about 2% when the statement came out and closed up 2.2% at $321.26.