In April, Apple announced that it would stop using Imagination‘s graphics technology in the iPhone and other new products by 2019. This sent the shares of the graphics chipmaker to plunge as much as 70%.
Interestingly, Apple has used Imagination’s chip technology under a licensing agreement for many years and is one of its biggest shareholders, with an 8.2% stake and its technology has formed the basis of Graphics Processor Units (GPU) in iPhones, iPads, iPods, TVs and watches.
Consequently, Imagination put itself for sale in June and today reports reveal that the tech firm has been sold for £500 million to the private equity firm, Canyon Bridge, backed by Chinese fund-Yitai Capital. Canyon Bridge recently raised $1.5bn (£1.1bn) from Chinese investors and has offices in Beijing and San Francisco. This deal made Imagination’s shares to soar by 35.6 percent.
Andrew Heath, the CEO of Imagination, said the takeover by China-backed Canyon Bridge was a very good outcome and would ensure it remained in the UK.
Heath added: “Imagination has made excellent progress both operationally and financially over the last 18 months until Apple’s unsubstantiated claims 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 becomes the latest UK chip designer to be bought by a foreign investor. Last year, ARM, which designs microchip technology used in Apple and Samsung smartphones, was bought by Japan’s Softbank for £24 billion.
On his part, Ray Bingham, who is a partner at Canyon Bridge, said: “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 globalisation of British-developed innovation.”
Of course, you know such ‘divorce’ cannot pass without any dispute. This is true as the two firms are still engaged in a disagreement over Apple’s exit with Imagination questioning the iPhone maker’s ability to develop and produce its own computer chip designs without breaching Imagination’s intellectual property rights.
This news of this deal will come as a huge relief for Imagination and its workers because almost half of its royalty payments come from its chip technology, used in its iPhones, iPads and iPods.
This is a lesson for companies not to rely entirely on a source of revenue because of the uncertainty and unpredictability associated with the business environment.
