Imagination sale nears as rival drops out of running

THE sale of British chip maker Imagination Technologies to Chinese government-funded buyers edged closer after a rival bidder dropped out.

Bosses at the Hertfordshire firm said an unnamed bidder had ruled out an offer, clearing the way for a controversial £550m bid by private equity fund Canyon Bridge.

It also means the £48m sale of Imagination’s US micro-processing division, MIPS, to Silicon Valley firm Tallwood, was set to go ahead without shareholder approval. If the rival bidder had stayed in the running, then shareholders would have had to say which deal they believed was best for the company.

Imagination, which has designed graphics chips for iPhones since 2007, put itself up for sale earlier this year after it was dropped by Apple as a supplier. Its shares went into freefall when the California firm ditched it, wiping £500m off its value in a day, partly because of how reliant it was on Apple for revenue.

The sale of MIPS is now expected to go through next month and is a condition of the sale of the rest of Imagination to Canyon Bridge. MIPS makes highperformance processors that analysts believe are used in American military and space programmes, with its separation seen as a way to avoid a run-in with US officials.

The White House has already blocked Canyon Bridge’s bid for another US tech firm on grounds of ‘national security’, due to its relationship with the Chinese government – which partly funds it.

It is a link that has also caused unease in the UK, where MPs, a former spy chief and a former defence minister have warned that giving Beijing access to British technology could harm the national interest.

Ray Bingham, a partner at the fund which is managing about £1.1bn for a company owned by the Communist state, has said their fears are ‘without foundation’.

But the concerns have piled pressure on Business Secretary Greg Clark, prompting a Government spokesman to confirm this week that ministers had sought ‘further information’ about the deal.

Mr Clark has statutory powers to intervene on the grounds of national security but has so far stayed tightlipped on the subject.

If no objections to the deal are raised formally, Canyon Bridge and Imagination hope they can complete the deal in November.

The field is still potentially open for another bidder to emerge before then, but Janardan Menon, an analyst at liberum, said this was unlikely. He added: ‘There may have been other bidders before but, at this stage, I would think that Canyon Bridge is the only one left in the game.

‘Clearly there were other parties interested earlier on but we can assume they were not willing to pay a price that is higher than the one now on the table.

‘you can be sure that Imagination will have talked to every conceivable buyer before they have reached this point.

‘The Chinese have a keen and stated interest in developing their semiconductor expertise and, while you can throw a lot of money at it, it is tough to generate that internally, so opportunities for them to bring IP inhouse will be welcomed.’

Canyon Bridge has said it wants to expand Imagination Technologies’ activities in Asia and has promised to keep the business and employees based in the UK.

There were reports earlier this week that ARM Holdings, the British chip maker bought by Japanese tech giant Softbank last year, was preparing to swoop in if Imagination’s deal with Canyon Bridge fell through.

A spokesman for ARM denied this but declined to comment further.