Tech takeovers gathering pace
TAKEOVER talk surrounding Imagination Technologies is nothing new.
The British chip designer, which claims to ‘put the smart into smartphones’, has long been a suspected bid target. So what has changed? Until recently it had two US titans on its shareholder register – Apple and Intel.
The firms, both big customers for Imagination’s technology, had each built up stakes in order to prevent the other taking out the company. But earlier this year Intel offloaded a huge chunk of its stake, taking its holding down to 4.6pc. Apple, meanwhile, still holds 8pc of the stock.
This led Liberum yesterday to put out a note saying the firm was ripe for a bid.
‘We previously didn’t see Imagination as an acquisition target due to its prior shareholder structure,’ said Liberum analysts. ‘However, given Intel’s sell down, the consolidation in the semiconductor sector and Imagination’s material discount to its peers we believe it could now be a target.’
The industry has seen a number of megadeals in recent weeks, all of which have buoyed shares in Imagination and its larger rival ARM.
US giant Avago last week agreed to buy rival Broadcom for £24bn – the biggest ever deal in the semiconductor sector. Intel, which is the world’s largest chip maker, yesterday said it will buy smaller competitor Altera for £10.9bn. Another mega- deal earlier in the year saw Dutch group NXP pay £8bn for US firm Freescale.
In total, Bloomberg has calculated that almost £80bn worth of deals have been struck in the past 12 months alone – which poses the question of when this tide of takeovers will finally lap at British shores.
Liberum yesterday named three US firms as possible buyers – circuit board design firms Synopsys and Cadence or technology company Rambus. ‘Any potential acquirer would also get access to Imagination’s patent portfolio and could monetise its large investment to date,’ they said. ‘Over the past five years we estimate that Imagination has invested a total of £750m, which is greater than its current market cap.
‘There is also a chance that Apple itself could decide to bid for Imagination,’ they said, given that Apple has a track record of taking its research and development in-house.
Imagination shares rose 6.6pc or 14.5p to close at 233.7p – much better than their 159p lower of late 2013 but still a long way short of the giddy heights of 715p they hit in early 2012.
ARM, almost 20 times the size of Imagina- tion but still easily acquirable at just over £16bn, rose 3p to 1158p.
Greece continued to be the word yesterday, as yet more brinkmanship from both sides took its toll on London shares. It is a crucial week (when isn’t it?) for the indebted eurozone nation, as it is due to pay back ¤300m on Friday to the IMF. It has to make four payments totalling ¤1.6bn this month in order to unlock the final tranche of its bailout money.
Discussions, now entering their fifth month, continue with both sides still in deadlock.
‘Given how fractious the current talks have been, we envisage that further negotiations would reach an impasse,’ said Kevin Ferriter from Capital Economics. He thinks Greece will, in the long run, fare better if cut free from the shackles of the single currency.
The Footsie slipped 30.85 points to 6,953.58 points, though the FTSE 250 climbed 65.78 to 18,220.20.
Firms with exposure to oil were a drag on the blue chips over fears that Opec production will remain high – keeping the price of black gold low for some time to come.
Weir Group fell 68p to 1956p, Glencore dropped 6.2p to 281.75p and Shell slipped 20.5p to 1922.5p.
It has been a tricky few days, weeks and months for HSBC. Just as it thought it had put revelations of massive tax dodging by its Swiss arm – and an ensuing shareholder scandal over its board – behind it, the bank was named by the FBI in its case against Fifa for running a ‘world cup of fraud’.
Reports yesterday suggest it is about to announce major job losses which, in the hard-headed City, means cost-savings.
Broker Investec yesterday raised its recommendation from sell to hold and hiked its target price from 570p to 620p. Shares inched up 1.5p to 624.4p.
Cairn Energy welled up 1.4pc to close 2.4p higher at 172p after RBC raised its price target to 250p from 220p. The firm is still reeling from a historical tax bill from the Indian government that was larger than the value of the entire company.
After months of searching, Gulf Keystone has finally found someone to lead it. The battle-scarred group has named Maersk Oil executive Jon Ferrier as its boss in a move it hopes will end a tumultuous period for the firm. But shares fell 2pc to 36.75p. ÷ BRITISH American Tobacco has paid just shy of £400m for Croatian tobacco firm TDR. The deal will increase the cigarette maker’s presence in Croatia, Bosnia and Serbia. With people in western countries quitting in record numbers, cigarette firms are looking to grow in emerging markets where fewer smokers know about the risks of taking up the killer habit. Shares in BAT wheezed 13p lower to 3592.5p.