China’s move to block SoftBank’s planned $5.4bn purchase of ABB’s robotics unit will have global repercussions. The Japanese tech fund was seemingly prepared to write too big a cheque to ABB: its offer implied an enterprise value of 19.4 times ebitda, higher than the multiple at which peers trade. But Soft Bank has positioned itself with multiple investments in the field, ranging from humanoid start-up 1X Technologies to general-purpose brain developer Skild AI.
China’s latest move delivers a setback to that strategy. It will be hard for Soft Bank to make the deal more palatable to Beijing. China’s National Development and Reform Commission frets that robotics data could be transferred overseas and used to train AI models.
But splitting out China, one of the unit’s three hubs and its biggest market, would render the acquisition virtually pointless. ABB comes out even worse. Assuming the Soft Bank deal cannot be salvaged, it loses a generous buyer and may well be forced to revert to its original plan to spin off the unit as a separately listed company.
That would inevitably entail a lower valuation. There’s an outside chance of a UK casualty too. ABB offered £4.1bn for smaller British peer Rotork in July, hoping to use the funds from selling its robotics unit to fund the acquisition.
It will now have to use its balance sheet to fund the outflow instead. Zooming out, the list of those affected by Beijing’s brake grows. M&A bankers and deal-hungry multinationals everywhere should take note that China is increasingly prepared to throw its weight around when it comes to high-tech deals.
The latest example comes only a matter of months since the NDRC demanded Facebook owner Meta Platforms unwind its purchase of Singapore-based Manus. China’s interventionism reflects the rising global rivalry on all things AI. But, more than that, it highlights that having the best — or the cheapest — chips.
Source: Financial Times Companies · Summarized by HeadlinesBriefing