The UK government has announced that it’s launching a formal probe into the proposed $40 billion takeover of the British chip designer Arm Holdings by the American chipmaker Nvidia. The country’s Competition and Market Authority (CMA) will begin a formal probe into the acquisition ‘later this year’, it says.

Nvidia sealed a deal to acquire Arm from its owner, the Japanese tech conglomerate SoftBank, in September last year. It agreed to pay $40 billion, split into $12 billion in cash, $21.5 billion in stock, a $5 billion conditional earnout and an extra $1.5 billion in equity for Arm’s employees.

SoftBank paid $32 billion to buy Arm in 2016 and is apparently looking towards a significant return from its investment with the sale to Nvidia. The $40 billion price marks one of the biggest deals ever seen in the semiconductor industry.

Now being probed by the UK, Nvidia could face major hiccups in its plan to takeover Arm given that it’s a company based in the UK, whose antitrust agency has now said that it’ll look at the effect of an Arm takeover by Nvidia on competition in the country and consider whether Arm has an incentive to withdraw, raise prices or reduce the quality of its IP licensing to Nvidia’s rivals following its proposed takeover.

The UK’s antitrust agency is inviting views on Arm’s takeover by Nvidia as regards competition in the country from stakeholders, it notes. With a formal probe to be launched this year, Nvidia could face major obstacles to its proposed Arm acquisition and may have to agree to some stipulated terms from the country to see the acquisition pull through.

In an extreme case, Nvidia could see its Arm acquisition blocked by the UK.

Photo: Nvidia CEO Jensen Huang | Nvidia

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