Fallen tech star Imagination Technologies up for sale after Apple row bites

Chips designer Imagination Technologies has put itself up for sale, two months after a row with Apple saw its shares slump more than 60%.

The firm was regarded as a leading light in Britain’s burgeoning tech sector, but ran into trouble when the phones giant, by far its biggest customer, said it would no longer rely on it for graphics design.

Apple accounts for more than half of Imagination’s revenues and last year held takeover talks with Imagination.

Today the shares bounced 18p to 141.5p, still well off the 268p they were before the shock news from Apple when the company was valued at £750 million. The market cap of the company is about £410 million, which suggests an offer priced at £500 million would go through.

Two parts of the business, MIPS and Ensigma, were already up for sale. Imagination said it has received “interest from a number of parties for a potential acquisition of the whole group”. It is in “preliminary discussions” with the aid of bankers from Rothschild.

There is some City scepticism that a deal will succeed, at least on good terms for shareholders.

Oliver Knott at N+1 Singer said it is “very difficult to quantify the value” of the firm and that “the stock remains in special situation territory”.

The possible buyers

Apple

Intel

CEVA

Mediatek

Qualcomm

Tsinghua Unigroup

Source: Liberum

Analysts at Liberum are more upbeat, and suggest a raft of possible bidders. Liberum raised its target price for the shares from 93p to 193p and thinks the sale price could be as high as 233p a share.

Numis said Google and Apple could also be interested. Apple retains an 8% stake. China’s Tsinghua Unigroup recently took a 3% stake and is thought to be in the running.

The sale follows the £24 billion sale of fellow London listed tech star ARM last year to Japan’s SoftBank.

Imagination said it remains in dispute with Apple, which uses its technology in iPhones, iPads, and iPods under a licensing agreement.

Apple said it would stop using this technology within 15 months to two years. Imagination thinks Apple can’t develop its own chip designs in that time without breaching its patents.

Imagination said earlier it was seeking evidence from Apple that it would not violate patents, but that Apple “has declined to provide it”.

ETX Capital’s Neil Wilson said offloading MIPS and Ensigma was never going to be sufficient.

The sale is a “pretty ignominious end to what was a great British tech success story”, he said.