A Chinese-backed fund is to test Theresa May’s pledge to subject foreign takeovers of British companies to closer scrutiny by lodging a formal bid for the struggling chipmaker Imagination Technologies.
Sky News has learnt that Canyon Bridge Capital Partners has hired advisers from the Wall Street bank Citi to work on an offer for Imagination, one of Britain’s leading technology businesses.
Sources said this weekend that Canyon Bridge had made significant progress during talks with Imagination in recent weeks, with a formal bid expected to be presented to the London-listed group in the next fortnight.
They added that talks between Imagination and other unidentified parties were ongoing, and cautioned that Canyon Bridge could yet decide against making a formal bid.
Canyon Bridge has offices in Silicon Valley and Beijing but is ultimately funded by entities connected to the Chinese government.
Its interest in buying Imagination comes after the Hertfordshire-based company said in June that the loss of its contract to supply Apple with graphics technology for iPhones and iPads meant it would put itself up for sale.
That move has left Imagination in dispute with Apple, with the British company telling the stock market last month that it had made “no progress” in resolving it.
It also said that it was examining the sale of two of its divisions, MIPS and Ensigma, as well as listening to offers for the whole company.
Imagination designs and makes chips for smartphone manufacturers, and also specialises in providing general purpose processing, where it counts the likes of Qualcomm and Broadcom among its key customers.
Despite the decline in its stock market value, with its shares down more than 42% over the last year, Imagination continues to be regarded as one of the UK’s most technology companies.
That status was reinforced by the £24bn takeover of ARM Holdings, its fellow chip designer, by Japan’s Softbank last year.
The deal came shortly after Mrs May became Prime Minister, since when she has vowed in the pages of the Conservatives’ manifesto to reform the rules governing mergers and takeovers.
“We will require bidders to be clear about their intentions from the outset of the bid process; that all promises and undertakings made in the course of takeover bids can be legally enforced afterwards; and the Government can require a bid to be paused to allow greater scrutiny,” the manifesto said.
It added that foreign ownership of companies controlling “important infrastructure” would not be allowed to undermine national security or “essential services”.
A forthcoming green paper is expected to set out the Government’s thinking on these issues in greater detail, but City sources believe that a Beijing-backed bid for Imagination would force ministers to extract firm commitments about British technology jobs from Canyon Bridge.
The private equity firm has already been struggling to persuade US officials that it should be allowed to own Lattice Semiconductor, a manufacturer of specialist microchips, for which it offered $1.3bn last year.
Canyon Bridge has twice refiled an application to the Committee on Foreign Investment in the United States (CFIUS), which has a history of blocking sensitive takeovers of American assets.
Imagination’s investors will be watching closely for details of the value attached to any offers for the company.
Its share price, which has fluctuated wildly in the last year, has left it with a market value of just £350m, down from about £2bn at its peak.
Rothschild, the investment bank, is advising Imagination on the talks with bidders.
Spokesmen for Canyon Bridge and Imagination both declined to comment this weekend.
Source: Sky