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Japanese Company discovers revolutionary debt service plan

My day job is in show business, so like many observers I have been keeping tabs on the protracted struggle for control of Viacom, the corporate entity that controls Paramount Pictures, and a host of cable channels (MTV, VH1, BET, Nickelodeon, Country Music Television). Against the desires of controlling shareholder and chairman Sumner Redstone, Viacom CEO Phillipe Dauman began soliciting bids for a minority stake in Paramount, worth somewhere between $4-6 billion dollars, depending on your valuation method and stake size. Variety, Hollywood Reporter and the like had a field day speculating which tech giant or Chinese behemoth would be in the running for a slice of one of Hollywood's most storied studios. I didn't get around the blogging it (I tweeted about it) but in early June I had a brainstorm that the Japanese conglomerate SoftBank Corp would be an interesting fit. This hunch was based on Dauman's assertions that the sale would be completed by June 30. In early June, Softbank made a series of moves to free up its balance sheet, and to me that signaled they might be weighing making an offer.

It turns out that SoftBank had other plans, and they were much bigger than I anticipated.

Today SoftBank announced the $32 Billion acquisition of UK chipmaker ARM. its a much larger bet than a piddling single digit billion for a Hollywood studio & cable network, and a play in an entirely different industry sector and strategy. The business press has labelled the acquisition " a bet on the future" as ARM specializes in the manufacture of microchips that power drones, , and is reportedly making a push to become a leader in Internet of Things technologies. Having sold more microchips than Intel, they are looking to power every smart fridge, washing machine, toaster or microwave that may end up in production. (Internet of Things is the idea of connecting just about every conceivable appliance to the internet to improve interactivity of use & efficiency.)

I thought SoftBank would be interested in Viacom because they already own Sprint, and while difficult, there would likely be upside of owning both a device maker, cellular service & mobile internet provider, and a world class premium content creator. Obviously their leadership sees the opportunity for growth in an entirely different area, to say nothing of the impact this acquisition will have on its balance sheet. Adding billions of debt via acquisitions is certainly an against-the-grain growth strategy for a company that must contend with long-standing issues in its home economy.

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