Imagination Technologies has agreed a sale to China-backed private equity firm Canyon Bridge in a deal valuing the British chipmaker at about £550m.
The Hertfordshire-based maker of mobile graphics processors put itself up for sale in June, soon after Apple, its largest customer and one of its biggest shareholders, said it would phase out use of its technology in products including the iPhone.
Friday’s 182p-per-share offer is little more than a quarter of Imagination’s 2012 stock price peak of 712.5p, which valued it at close to £2bn.
Just a week and a half ago, Canyon Bridge, which is headquartered in Palo Alto, California and is backed by state-owned Chinese fund Yitai Capital, saw its $1.3bn attempt to acquire American chipmaker Lattice Semiconductor blocked by President Donald Trump over national security concerns.
Canyon Bridge’s acquisition of Imagination excludes its US unit, MIPS, which is being bought by Tallwood Venture Capital, a Silicon Valley investment group, for $65m. Canyon Bridge’s deal is conditional on the completion of the MIPS sale.
A foreign takeover of Imagination would mark the latest acquisition of a British high-tech company at a time when Theresa May’s government is trying to portray itself as both open to global markets but eager to scrutinise transactions in sensitive sectors of the economy. Last year, Arm Holdings, the Cambridge-based chip designer at the heart of most smartphones, was sold to SoftBank of Japan for £24bn.
In an attempt to head off potential scrutiny from the UK government, Canyon Bridge pledged to continue to invest in Imagination’s UK research and development capabilities and said it had “no plans” to cut staff or move the business to another country. Representatives from Canyon Bridge met British government officials in the run-up to the deal, a spokesperson said.
“Canyon Bridge’s investment strategy is not to take businesses to China but to make them more competitive in China — offering access to the largest market in the world,” the investment group said in a press release announcing the deal late on Friday night in the UK.
Apple’s latest iPhone, unveiled last week, included a new graphics processing unit that it said it designed in-house. GPUs are a key enabler of videogames, artificial intelligence and virtual reality features in smartphones.
Ray Bingham, partner at Canyon Bridge, said that with its backing, Imagination would “continue to invest in developing its technology, attract and hire the best engineers, and acquire and service customers globally”.
“This transaction is in line with Canyon Bridge’s strategy of providing equity and strategic capital to enable technology companies to reach their full growth potential by opening new markets through our collaborative investment approach.
“We are investing in UK talent and expertise in order to accelerate the expansion of Imagination, particularly into Asia, where its technology platform will lead the continued globalisation of British-developed innovation.”
Canyon Bridge’s 182p per share offer is a 42 per cent premium to Friday’s closing share price of 128½p but below the level at which the stock was trading immediately before the company’s break with Apple was revealed in April. The deal is structured as a scheme of arrangement.
Andrew Heath, Imagination’s chief executive, called the proposed deal a “very good outcome” for shareholders.
“Imagination has made excellent progress both operationally and financially over the last 18 months until Apple’s unsubstantiated assertions and the subsequent dispute forced us to change course,” Mr Heath said in a statement. “The acquisition will ensure that Imagination — with its strong growth prospects — remains an independent IP licensing business, based in the UK, but operating around the world.”
Imagination’s board have given their support to the proposed deal.
“The Imagination directors believe that the proposed acquisition provides Imagination shareholders with a very good outcome and provides execution certainty at a time when the future of the business has been negatively impacted by the actions of Apple,” the company said in a regulatory filing.
Additional reporting by Arash Massoudi in London