Late this evening Imagination Technologies has announced that they have finally agreed to a buy-out offer. After making noise last month as a potential suitor, Canyon Bridge has announced that they’re buying the struggling GPU firm for 550 million GBP. Meanwhile, as an annex to the deal, Imagination’s MIPS CPU division, which was separately on the market, is being sold to Tallwood Venture Capital for 65 million USD.

As this is a late breaking announcement, not a great deal is known about this deal at the moment. Imagination’s board of directors has reached an initial agreement with Canyon Bridge to sell the company for 182 pence a share, which works out to £550M for the entire company. This is of course contingent on the deal being approved by Imagination’s current shareholders, who are likely to approve the deal as it represents a 41% premium over Imagination’s current 129 pence share price. It is interesting to note however that this price is still well below the roughly 280 pence share price Imagination was trading at before the initial Apple GPU news broke.

As for Imagination’s buyer, Canyon Bridge, the company has not initially said what they intend to do with Imagination. However they have announced that they won’t be cutting any jobs after the acquisition, according to Reuters. The bigger challenge is likely to be getting the deal approved by regulatory authorities; Canyon Bridge has close ties to the Chinese government, and it was on these grounds last week that their acquisition of Lattice Semiconductor was blocked by the US government. In this case the principle authority impacting the deal will be UK authorities.

MIPS Sold to Tallwood for $65 Million

Meanwhile, as a condition of the Canyon Bridge acquisition, Imagination has also finalized their plans for selling off their MIPS business. That business will be sold to Tallwood Venture Capital of California for $65 million. As Imagination initially acquired MIPS for $100M in 2012, this means that the value of the business unit has dropped $35M/35% over the past 5 years. There’s no immediate word on what Tallwood will be doing with MIPS, however it’s notable that the company’s investment portfolio includes a large number of technology companies that were then acquired by bigger players. So it may be that Tallwood intends to rehabilitate MIPS for a future sale.

Politically, selling off the MIPS business also removes a potential US hurdle to the acquisition, as while Imagination was a UK company, the MIPS business operated outside of the US. By selling off MIPS to a US group, the deal is now primarily about Imagination’s GPU business in the UK, which would help Canyon Bridge avoid having another deal blocked by the US government.

End of One Saga, Start of Another

The announcement of an acquisition agreement all but puts an end to an interesting and somewhat tumultuous odyssey for Imagination over the last 6 months. The long-time supplier of GPU technology for Apple’s A-series SoCs found themselves in a pinch in April of this year after Apple informed them that they were going to develop their own GPU, ceasing their use of Imagination’s IP and tapering off royalty payments accordingly. As Apple represented a full half of Imagination’s revenue in the 2015/2016 period, the loss of their biggest customer immediately put Imagination into a bind, as it was clear that Imagination would need to make some significant changes in order to adapt to the loss of Apple’s royalty payments.

The end result was that the company embarked on two major changes. The first being that the company would double down on the GPU business, transitioning from a varied provider of processor IP and focusing almost exclusively on GPUs, video encoders, and other visual processors. In order to achieve that, the company would sell off its MIPS CPU and communications businesses. Eventually the company also opted to put itself up for sale, courting buyers from both the technology and investment communities. Crucially, along with buying the company itself, its employees, and its GPU technology, the buyer would also essentially be buying the opportunity to sue Apple over IP violations with their custom GPU, if they decide to take Imagination’s original complaints against Apple all the way.

Source: Imagination Technologies

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  • StrangerGuy - Sunday, September 24, 2017 - link

    Over half a billion bucks for a GPU company that has zero competitive advantage against their ARM/QC/Apple competitors and a CPU ISA nobody gives a crap about is the opposite of being "undervalued".
  • darkich - Monday, September 25, 2017 - link

    ..actually, for a company that has been at the very top of the game for the past ten years (iPhone and iPad, ringin the bell?) and at the forefront of innovation in the GPU space (ray tracing, tile based rendering etc..)
  • melgross - Monday, September 25, 2017 - link

    Sales and profits are what matter in business. I think this very high price was offered just so that there wouldn’t be competing offers, as it’s way too high to be a value. It’s similar to what Google did years ago, when buying Motorola for $12.5 billion, on the day when the company was valued, in the market, at $6.5 billion. They offered that much because they knew no one else would be that stupid and offer more. Look what happened there.

    Now, Google is giving HTC $1.1 billion for 2,000 engineers that supposedly worked on the Pixel. Another overpriced acquisition.
  • name99 - Monday, September 25, 2017 - link

    However darkich is correct. IMG DOES have great technology. The fact that they've not been able to sell it to very few people suggests to me something very wrong at the management level, not at the engineering level.
    Meaning that it is certainly POSSIBLE, IMHO, for new management to come in, sweep out the current sales team, and ink some deals with Huawei, Mediatek, maybe revive the deal with MS, start talking to auto manufacturers, etc etc.
  • melgross - Monday, September 25, 2017 - link

    Oh, I don’t know. Using whatever comes in the SoCs being offered by the vendors is always going to be much cheaper. Who would integrate it? Qualcomm certainly isn’t going to do it for their chips. I doubt Samsung would. The rest? Well, if they really wanted this IP, they would have done a deal. The fact is that other licensees have been leaving them even before Apple did.

    I think that they’re in a bind. The price for this deal is much too high. If you look at the financials, they’re deadful.
  • phoenix_rizzen - Monday, October 2, 2017 - link

    Heawei and MediaTek make their own SoCs, currently using Mali GPUs. A good sales team might be able to make a deal to replace them with PowerVR GPUs. Maybe. Doubtful, but not impossible.
  • levizx - Monday, October 9, 2017 - link

    HiSilicon did sign a licensing deal with IMG back in 2012, but they never used it.
    MediaTek are currently using PowerVR in their product line, so the point is moot. They are simply not that competitive against ARM's Mali offerings.
  • melgross - Monday, September 25, 2017 - link

    This is a very overvalued purchase. Imagination has been losing sales for years, and has also been losing money. Over half of their sales were to Apple, and over 75% of their profits, income actually, since they have losses.

    Since they haven’t beeen able to generate much sales outside of Apple, it’s hard to see what will change now. It’s cheaper, and easier, for most companies to just use Mali, or whatever Qualcomm offers on their chips. After all, Android devices aren’t really competing on performance.
  • levizx - Monday, October 9, 2017 - link

    What are you on? Qualcomm GPU has been on par with Apple since the beginning.
  • peevee - Tuesday, September 26, 2017 - link

    " £550M for the entire company"
    Or in other words NOTHING compared to leaders of the industry.

    Interesting, these British companies (ARM and Imagination) just cannot become big businesses, just staying medium size at best. Compare to all the American, Japanese and Korean monsters.

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