ARM 'may launch bid for Imagination' if Chinese sale falls through


ARM is getting ready to launch a bid for its rival British chipmaker, Imagination Technologies, if the US blocks a Chinese-backed attempt to buy the firm.

The Cambridge-based chip designer is interested in acquiring Imagination if the UK government stops the sale to Chinese investment fund Canyon Bridge from going through, according to The Telegraph.

The publication's sources said ARM doesn't want to enter a bidding war, but would like to be a buyer of last resort. The sources said it is ready to "ride to the rescue" if Canyon Bridge is denied the sale. The Telegraph reported earlier this month that the UK government had informally expressed concern over Canyon Bridge's interest to bankers working on the deal.

ARM did not take part in the auction before as it thought it may attract competition scrutiny.

A City source told the publication: "If there's no sale, the question is whether the Government would let over a thousand hi-tech jobs be lost rather than let ARM be the buyer."

IT Pro has contacted Imagination for comment on the story. ARM declined to comment.

Imagination agreed to sell up to Canyon Bridge, a Chinese investment fund, for 550 million yesterday (see below). But the deal is dependent on Imagination selling its US unit, or it would likely be subject to scrutiny from the US's Committee on Foreign Investment, which blocked another bid from Canyon Bridge for a semiconductor company earlier this year.

Imagination put itself up for sale in May after losing Apple as its chief customer, which developed its own chips for its latest set of iPhones, released last week. Imagination's shares fell by about 50% as a result. However, its shares rose following news of yesterday's potential sale, and are currently worth 171.25.

Japanse firm SoftBank bought UK tech giant ARM in July of last year directly after the vote to leave the EU, in a deal worth 24 billion. ARM was one of the UK's biggest tech giants and said it would continue to work from its Cambridge headquarters following the deal. Anaylsts said the deal was probably in the works for some time before Brexit.

25/09/2017: Imagination agrees a 550m sale to Chinese investment fund

Imagination Technologies has agreed to sell up to a Chinese investment fund for 550 million, five months after saying Apple was ending its relationship with the chipmaker.

The US tech giant once accounted for half of the UK chipmaker's revenues but Imagination said back in April that Apple planned to kill their business relationship, promptly putting itself up for sale in June.

Imagination's shares swiftly fell by about 50%, amid Apple's counter-claims that it had given Imagination two years' notice about quitting as a customer to focus on building its own chips.

Global private equity investment fund Canyon Bridge now intends to buy the British company, whose CEO claimed the deal "is a very good outcome" for shareholders.

Andrew Heath, CEO at Imagination, said: "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."

Canyon Bridge's bid for Imagination comes after US President Donald Trump blocked its attempt to buy another chipmaker, Lattice Semiconductor, over national security concerns.

Imagination's sale to Canyon Bridge depends on the firm selling its US unit, Mips, to Tallwood Venture Capital for $65 million. Doing so will avoid the US's Committee on Foreign Investment, which blocked Canyon's Lattice bid, reviewing the fund's bid for the British firm.

Canyon Bridge is headquartered in Silicon Valley but is backed by state-owned Chinese fund Yitai Capital. It declared it wants to make businesses it acquires more competitive in China, rather than moving them to the country.

Ray Bingham, a partner at Canyon Bridge, said: "Imagination has a world-class management team and highly talented employees. 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.

"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."

Imagination's share price rose from 130 on Friday to 177 on Monday on the back of the news.

In July of last year, Japanese firm SoftBank bought UK tech giant ARM, a Cambridge based chipmaker, in a deal worth 24 billion. ARM, one of the UK's last tech giants, said it would continue to work from its Cambridge headquarters and pledged to double the number of staff it employs in the five years following the deal.

10/07/2017: Apple: We told Imagination we were leaving two years ago

Apple has hit back at claims by Imagination Technologies that the tech giant unfairly laid off the supplier by saying it had given Imagination two years' notice it was going to quit paying royalties because it wouldn't be using the company's tech anymore.

Apple said it first told Imagination it wouldn't continue buying its new technology back in 2015, but would carry on using its old systems that it would pay for. In 2016, it told the company it wanted to amend its contract, reducing its royalty rate because it was no longer using all the intellectual property Imagination owned, and therefore it wasn't fair it was still paying the full amount.

In February 2017, Apple told Imagination it would be terminating the relationship, so would stop paying the company altogether from 2018.

"We began working with Imagination in 2007 and stopped accepting new IP from them in 2015," Apple told Bloomberg. "After lengthy discussions we advised them on February 9 that we expected to wind down our licensing agreement since we need unique and differentiating IP for our products. We valued our past relationship and wanted to give them as much notice as possible to adapt their future plans."

Imagination waited for two months before telling the public its relationship with Apple would be winding down, despite the company apparently knowing Apple's plans two years before the official announcement was made.

Because the news has had such a knock-on impact, causing the company's share price to fall sharply and forcing Imagination to sell up, Bloomberg explained regulators will need to look into the matter, particularly that Imagination had an "overriding obligation" to tell the public as soon as possible in the event it holds information that may be relevant to the share price," financial law barrister Tim Arron told Bloomberg.

22/06/2017: Imagination Technologies puts itself up for sale

UK chip designer Imagination Technologies has put itself up for sale after losing Apple as its chief customer.

The tech firm is currently in dispute with Apple, once its largest customer, over licensing payments and alleged patent infringements.

Apple uses Imagination Technologies chip technology in its iPhones, iPads and watches. The US company once accounted for about half of the UK firm's revenues, but its announcement in April to stop using the processors caused Imagination's shares to drop more than 50%.

Imagination said that recent interest from a number of potential buyers in the past few weeks has caused the company to initiate a formal sale process. The UK firm also revealed that it's already begun preliminary discussions with several parties.

But it added: "There can be no certainty that any offer will be made for Imagination, nor that any transaction will be executed, nor as to terms of any such offer or transaction."

Sales of two of its businesses, MIPS and Ensigma, to raise money, are "progressing well", it said.

Apple's decision to switch from Imagination's chip technology to its own independent design for future devices started a dispute between the two tech companies. Imagination requested evidence from Apple that Apple's new designs did not infringe Imagination's patents or intellectual property, but Apple has declined to provide this evidence.

Imagination expressed doubts that the US company would be able to create separate and original designs despite its long-term dependency on the UK firm's chip technology.

"Imagination believes that it would be extremely challenging to design a brand new GPU architecture from basics without infringing its intellectual property rights," the UK tech firm said in April. The dispute remains unsettled, and potential alternative arrangements for the current contract are being discussed.

Zach Marzouk

Zach Marzouk is a former ITPro, CloudPro, and ChannelPro staff writer, covering topics like security, privacy, worker rights, and startups, primarily in the Asia Pacific and the US regions. Zach joined ITPro in 2017 where he was introduced to the world of B2B technology as a junior staff writer, before he returned to Argentina in 2018, working in communications and as a copywriter. In 2021, he made his way back to ITPro as a staff writer during the pandemic, before joining the world of freelance in 2022.