Imagination re-wins Apple as customer

Almost three years ago, Apple decided it could get by without Imagination Technologies as a supplier, but 2020 gets off to a flier for the UK chip firm resigning a licencing agreement.

Details are thin on the ground for the moment, though this completes a very circular story for the Hertfordshire-based company. Imagination Technologies has now confirmed Apple has signed a multi-year agreement to access a “wider range of Imagination’s intellectual property”.

The original deal between the pair was signed in 2014, though it only took three years for Apple to decide it wanted to move operations in-house. This is becoming an increasingly common tactic for the iLeader, the acquisition of Intel’s 5G modem business is another example, though it seems Apple was not able to replicate the success of Imagination Technologies’ graphics cards.

Although Apple is still a highly profitable company, slowing growth and increased costs for the iPhone have presented a problem on the spreadsheets. As a result, CEO Tim Cook has attempted to supercharge the ‘software and services’ division to generate momentum, while bringing more of the supply chain in-house is another way to create efficiencies and profits. Imagination was a victim of the latter.

As a result of losing Apple as a customer, and more than half of the company’s annual revenues which were tied to the firm, Imagination Technologies saw its share price plummet 70% and eventually have to succumb to being sold to Canyon Bridge, a Chinese-backed private equity firm, for £550 million. At the peak of its powers, Imagination Technologies was worth more than £2 billion.

The agreement with Apple comes a month after the launch of the A-Series chipset, which Imagination Technologies CEO Ron Black described as the “most important GPU launch” in 15 years. This is of course little more than posturing from the CEO, though Apple clearly bought into the buzz, that or it figured out that designing and manufacturing GPUs is more difficult than it first thought.

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.