Wu Xiongang, CEO of Arm China, is becoming the key to the merger between Arm and NVIDIA

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Nvidia plans to buy British chip designer Arm for $40 billion, according to the Financial Times. But the deal faces new challenges in China. Allen Wu, CEO of Arm’s Chinese joint venture, reportedly holds a 17% stake in the joint venture. Wu Xiongang took over a key investment firm in November and now controls four-sixth of Arm China’s shareholders, according to company registration documents.

Two companies controlled by Wu Xiongang have filed a lawsuit in Shenzhen, accusing Arm and its main partner in the joint venture, private equity firm Hopu Investments, of illegally removing him in June. At present, Wu Xiongang still manages the daily operations of Arm China and is in charge of the company’s seal, and still has legal control over the company’s business. This also makes Wu Xiongang a major obstacle to NVIDIA acquisition transactions.

A person familiar with Arm’s China board said he sees the deal as only a 50 percent success rate. Arm’s current owner, Japan’s SoftBank Group, has appointed Eric Chen, the head of SoftBank’s China team, to coordinate Wu’s exit, two other people familiar with the matter said. The severance package being discussed is somewhere between $100 million and $200 million, they said. People familiar with the matter said that in September, the two sides seemed to be on the verge of reaching a settlement, and Wu Xiongang and Eric Chen had both told colleagues separately that Wu Xiongang would leave by the end of the month.

But the value of Wu Xiongang’s 16.6% stake has been the crux of the matter. Wu Xiongang believes that the value of Arm China has grown fivefold since its inception in 2018, to 50 billion yuan ($7.5 billion) today. It is unclear whether Wu Xiongang intends to hold or sell the shares, and whether there are suitable buyers for Arm, Hopu and the Chinese government. The two sides are still in the mediation stage and a deal is also possible. But recently, Wu Xiongang told colleagues that it is still uncertain whether he will leave Arm China. People familiar with SoftBank and Hopu said the talks could drag on.

Arm China is responsible for Arm’s licensing transactions in China, and will also carry out some R&D work. In 2018, SoftBank said Arm China contributed a fifth of the company’s total sales. In June, Arm China’s board of directors voted 7-1 to remove Wu Xiongang because of alleged conflicts of interest with his Alphatecture investment fund.

A spokesman said Wu Xiongang had disclosed the existence of the investment fund to the board from the outset. The Arm China drama comes at a critical time when Arm and Nvidia are preparing to apply to Chinese market regulators for approval of the acquisition. When submitting an application to the Chinese market regulator, the cooperation of Arm China and the data of Arm China are required. Arm and Nvidia have yet to submit any documents to regulators, two of the people said, with one saying the reason behind it was their struggle to gain control of the joint venture.

Two people familiar with Arm China said that within Arm China, Wu Xiongang had assembled his own security team, denying any representatives of Arm or Arm China’s board of directors access to the company, and emails sent by Arm headquarters to employees were also filtered by the system. shield.

Arm, SoftBank and Nvidia all declined to comment. Wu Xiongang did not respond to a request for comment. A spokesman for Arm China said it would not comment on any speculation and would take legal action against “any institution and individual who spread rumors in an attempt to damage the company’s reputation.” The spokesperson also said that “a stable Arm China is in everyone’s best interests.”

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