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SoftBank Shareholders Aren’t Thrilled About Its $32 Billion Purchase of ARM

SoftBank Chairman and CEO Masayoshi Son SoftBank Chairman and CEO Masayoshi Son
SoftBank Chairman and CEO Masayoshi Son Photograph by Getty Images

Shares in SoftBank Group plunged 10% in Tokyo on Tuesday to a 3-1/2-month low, after the heavily indebted company said it would buy Britain’s ARM Holdings for $32 billion.

The purchase, announced on Monday, is SoftBank’s (SFTBY) largest takeover to date and piles on more debt at the Japanese tech and telecoms group, whose investments have ranged from U.S. carrier Sprint (S) to Chinese e-commerce giant Alibaba (BABA).

The 17 pounds-a-share price tag for ARM represented a 43% premium to Friday’s close.

SoftBank’s charismatic founder Masayoshi Son has said the company had raised nearly 2 trillion yen ($19 billion) in cash over the last few months through asset disposals, including the sale of shares in Alibaba. SoftBank has also secured a 1 trillion yen ($9.42 billion) bridge loan from Mizuho Bank to finance part of the ARM (ARMHF) purchase, it said on Monday.

Analysts, however, had expected SoftBank to use the cash from asset sales to reduce its debt or give shareholders a windfall by buying back its own shares.

 

SoftBank had interest-bearing debt of 11.9 trillion yen ($112 billion) at the end of March, including 4 trillion yen at Sprint, and its net debt currently stands at 3.8 times core earnings.

SoftBank shares were not traded on Monday, a market holiday in Japan.