ARM designs processors that power a vast array of devices: its chips can be found in 95 percent of smartphones (including those from Apple and Samsung) and 80 percent of digital cameras.
Founded in 1990, over 60 billion ARM-based chips have been shipped by over 300 companies. ARM has recently turned its attention to the Internet of Things, a growing market which will also require billions of the low-power chips that ARM specialises in.
Chairman and CEO of SoftBank Masayoshi Son described ARM as an "excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the 'Internet of Things'".
He said ARM will remain an independent business within SoftBank, and continue to be headquartered in Cambridge.
Softbank said it intends to at least double the number of people employed by ARM in the UK over the next five years, as well as increasing staff outside of the country. It also plans to "accelerate its strategy and allow it to fully realise its potential beyond what is possible as a publicly listed company".
Son added: "This is one of the most important acquisitions we have ever made, and I expect ARM to be a key pillar of SoftBank's growth strategy going forward."
ARM's business model is to design and license processors, rather than actually manufacture or sell them itself. ARM's customers take its designs and pay it a licence fee and a royalty on every chip or wafer produced, with the chips then integrated into a wide variety of devices from smartphones to car braking systems and network routers.
The UK's new chancellor Philip Hammond welcomed the deal on Twitter, saying it showed the UK has lost none of its allure to global investors: "This would be largest ever Asian investment into the UK & would double size of ARM's UK workforce. Big vote of confidence in British business."