The planned takeover of SoftBank’s Arm by Nvidia has fallen through due to “significant regulatory challenges,” according to a joint statement released by the two companies on Tuesday.

The acquisition was first disclosed in 2020, and it was valued at $40 billion in Nvidia shares and cash at the time.

Arm will now prepare for a public offering in the fiscal year that ends March 31, 2023, according to SoftBank.

Arm develops the technology that powers every smartphone processor, including Apple’s iPhones and Qualcomm-powered Android handsets. Almost every major semiconductor business is one of its clients.

Since its announcement, the acquisition has been scrutinized. Arm, a British firm, is a neutral supplier to a number of tech behemoths.

Both Qualcomm and Microsoft employ Arm’s main technology, the instruction set, and have spoken out against the merger.

The Federal Trade Commission of the United States filed a lawsuit in December seeking to halt the acquisition on antitrust grounds. The sale was investigated by UK competition authorities last year.

Semiconductor and technology businesses were concerned that if Nvidia acquired Arm, it would prefer its own business over its clients, who might not have a choice but to use ARM technology.

“The 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,” the FTC said in December.

The $1.25 billion deposit received as part of the deal is non-refundable, according to SoftBank, and will be recognized as profit in the fourth quarter of the fiscal year ending March 31, 2022.

Arm was a stand-alone company until SoftBank Group bought it for $32 billion in 2016.

Nvidia had previously stated that the deal would close this year.

With immediate effect, Arm CEO Simon Segars has stepped down and been replaced by Rene Haas.

“Rene is the right leader to accelerate Arm’s growth as the company starts making preparations to re-enter the public markets,” said Masayoshi Son, CEO of SoftBank Group.

Since 2017, Haas has been the head of Arm IP Products Group. The company has concentrated on items for growing markets such as automobiles during his leadership.

Arm said in a statement that the current financial year, which ends in March, is on track to deliver record royalty revenue, licensing revenue, and profitability.

Arm was created in 1990 as a joint venture between numerous companies, including Apple, in Cambridge. It concentrated on low-power chips, which have risen in popularity in recent years as the rise of smartphones has made processor efficiency more crucial than raw computing power from companies like Intel.

(Adapted from TheTimes.co.uk)