UK set to lose its Imagination to China-backed investors

Embedded GPU maker Imagination Technologies has accepted an acquisition bid of £550 million from Canyon Bridge, which receives its funding from China.

Imagination has been looking for a buyer all summer, having concluded this was the best option for its shareholders after its biggest customer – Apple – announced it was going to do its own GPU thing earlier in the year. Its board has accepted an offer of 182p per share – a 42% premium on the share price immediately before the announcement that values the deal at around £550 million.

Canyon Bridge Capital Partners seems to have been created in order to buy US company Lattice Semiconductor late last year, based in the US but with initial funding from Chinese investors. This provenance seems to have been the reason the Committee on Foreign Investment in the US subsequently blocked the move.

With the Lattice acquisition having been valued at $1.3 billion, the move for Imagination has the feeling of a consolation prize. “Imagination has a world-class management team and highly talented employees,” said Ray Bingham, Partner at Canyon Bridge. “With our backing and investment Imagination can 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 globalization of British-developed innovation.”

“The proposed acquisition is a very good outcome for Imagination’s shareholders which the Imagination directors are intending to recommend unanimously,” said Imagination CEO Andrew Heath. “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.

“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 employs a large number of hugely talented individuals who have developed our market leading technology. They and the business as a whole will benefit from Canyon Bridge’s investment in Imagination as it moves to the next stage of its development.”

One condition of the acquisition will be the separate sale of the MIPS embedded CPU unit, which Imagination acquired back in 2012. While the UK doesn’t seem to be either as protectionist (e.g. Softbank buying ARM) or as twitchy about Chinese involvement in its tech sector as the US it will still be interesting to see if its government decides to have a look at the deal.