Imagination Technologies rockets on £550m Canyon Bridge deal
Shares in Imagination Technologies surged in early trade after the company agreed late on Friday to be taken over by US-based, Chinese-backed private equity firm Canyon Bridge Partners for £550m.
FTSE All-Share
4,423.59
17:14 26/04/24
FTSE Small Cap
6,484.28
16:59 26/04/24
Imagination Technologies Group
181.25p
16:35 02/11/17
Technology Hardware & Equipment
1,920.18
16:30 11/04/24
Under the terms of the deal, each shareholder will be entitled to receive 182p in cash per Imagination share, which represents a premium of around 42% to the closing price on 22 September and 47% to the price on 21 June, which was the day before the company announced it was putting itself up for sale.
Chief executive officer Andrew Heath said: "The proposed acquisition is a very good outcome for Imagination’s Shareholders which the Imagination directors are intending to recommend unanimously. 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."
Ran Bingham, partner of 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.
"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."
Imagination also said on Monday that it has agreed the sale of its MIPS business to US-based Tallwood VC for a cash payment of $65m.
JPMorgan Cazenove said: "The price being offered for the IMG graphics business looks very attractive indeed and none of the previous transactions we have compared it to nor the current prospects of the business would have indicated this very high value."
Investec said the bid price of 182p looks "a good outcome considering the underlying business is structurally unprofitable without Apple royalties".
"The deal appears structured to avoid triggering Committee on Foreign Investment in the United States involvement, but this is not completely certain. UK government interference has also been mentioned, although there is no explicit process for this. There will likely be some conjecture around counter-bidders.
"Overall, the deal looks reasonably safe as structured, but nothing is ever simple with Imagination."
The brokerage kept its 'hold' rating on the stock but upped the price target to 182p from 160p.
Numis said it does not expect any involvement of the UK government as the proposed transaction is the best way to protect UK based jobs at Imagination and there are no security considerations with regards to PowerVR.
"Given this is the result of a formal sale process, we believe it is unlikely that there could be further bids although it
is not impossible. While it is clearly disappointing to lose the last semiconductor business of scale from the UK listed market, we believe the agreed transaction represents a good deal for shareholders."
At 1520 BST, the shares were up 28% to 165.50p.