Imagination, MIPS to be sold to China-, California-connected VCs

Imagination, MIPS to be sold to China-, California-connected VCs
Business news |
Processor intellectual property licensor Imagination Technologies Group plc (Kings Langley, England) has agreed to sell off its MIPS processor business to Tallwood Venture Capital (Palo Alto, Calif.) and then to sell the remainder of itself to Canyon Bridge Capital Partners LLC (Palo, Alto, Calif.), a venture capital firm that is managing funds provided by China.
By Peter Clarke

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The sale of the MIPS processor business has been agreed for $65 million in cash and is expected to close in October. The sale of what remains of Imagination to Canyon Bridge is dependent on the MIPS sale and has been agreed at £550 million in cash (about $740 million) and could come into effect in November.

Tallwood VC is a stalwart of the California venture capital scene with a focus on semiconductor companies. Canyon Bridge Capital Partners is a much newer company that was recently prohibited from acquiring FPGA company Lattice Semiconductor Corp. by US President Donald Trump because of its Chinese connections (see President Trump blocks Lattice deal).

Andrew Heath, CEO of
Imagination Technologies Group plc

Imagination’s board of directors has agreed to the sale of Imagination to CBFI Investment Ltd., a newly-formed company owned by Canyon Bridge Fund I LP (CBFI), which is a venture capital fund managed by Canyon Bridge Partners LLC.

Although Canyon Bridge is a new company with almost no track record, it has approximately $1.5 billion of funds under management and Ray Bingham, a former CEO of EDA company Cadence Design Systems as an executive. The funds are being provided by initial anchor partner Yitai Capital Ltd., a Chinese state-owned enterprise, according to details provided by Imagination and Canyon Bridge.

Canyon Bridge’s strategy is to provide equity capital to help strong companies to accelerate growth in new markets and particularly in China, according to the Canyon Bridge website.

In the announcement of the deal it is said Canyon Bridge intends to invest in PowerVR and Ensigma R&D in the UK to allow Imagination to advance its technical position in processor IP architecture and to help it to penetrate new application sectors and geographic markets. PowerVR is Imagination’s line of graphics and neural network processors and Ensigma is a line of communications IP. Canyon Bridge would also look to Imagination to develop artificial intelligence technology for such markets as augmented and virtual reality and machine autonomy, the document said.

Next: How much investment in UK?


How much Canyon Bridge might be prepared to invest beyond the purchase price for Imagination was not discussed in the document.

The price that Canyon Bridge has agreed to pay for Imagination, 182 pence per share, represents a premium of 41.6 percent over the Imagination share price of 128.5 pence per share recorded at the close of the London Stock Exchange Friday September 22.

Ray Bingham, partner at
Canyon Bridge Capital Partners LLC.

Although Imagination has been a successful vendor of graphics processor units (GPUs), particularly in to smartphone SoCs, it has struggled financially and in the past relied on leading customers, particularly Apple Inc., to bail it out. Imagination put itself up for sale (see Imagination puts itself up for sale) in June 2017 after it had revealed that Apple had said it would discontinue its licensing relationship with Imagination and stop paying royalties (see Apple breaks with Imagination and Apple hires group of UK GPU engineers ).

Before the final disposal of Imagination goes ahead the company plans to sell its MIPS business, including all intellectual property and patents to Tallwood MIPS Inc., a subsidiary company of Tallwood Venture Capital. The price, on a cash and debt-free basis, will be $40 million payable on completion with a further $25 million due six months after completion.

“This transaction, which is separate to the offer for Imagination by Canyon Bridge, will ensure MIPS remains an independent licensing business,” said Imagination CEO, Andrew Heath, in a statement issued after the close of the London Stock Exchange on Sept. 22.

In the same statement Bingham of Canyon Bridge, said: “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.”

Next: To accelerate into Asia.


Bingham continued: “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.”

On the sale of Imagination Heath commented: “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.”

Related links and articles:

www.imgtec.com

www.canyonbridge.com

www.tallwoodvc.com

News articles:

Imagination puts itself up for sale

Apple breaks with Imagination

Apple hires group of UK GPU engineers

Imagination launches flexible neural network IP

How Apple will dodge an Imagination lawsuit

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