Imagination Technologies put up for sale as Apple dispute continues
By Oliver Haill
Date: Thursday 22 Jun 2017
(ShareCast News) - Imagination Technologies Group has formally put itself up for sale and is in talks about a potential takeover after receiving interest from "a number of parties" in recent weeks, which analysts suggested could include Intel, Qualcomm or even Apple.
Imagination last month began a dispute resolution process with Apple and has reserved its rights over the US giant's "unauthorised use" of its confidential information and intellectual property rights.
The company said it had made progress with the disposal of two of its three main businesses, MIPS and Ensigma, since putting them on the block on 4 May 2017, with indicative proposals received for both businesses.
Imagination's share prices has fallen more than 50% since it stunned the market at the start of April by saying Apple was pulling the plug on its chip supply deal in little over a year's time.
With that price fall, no wonder buyers are keen, said analyst Neil Wilson at ETX Capital.
"Apple accounts for about half its revenues and the drop in the share price on the day of the announcement was one of the biggest on record for a mid or large-cap company, wrecking its market cap and forcing it to do all it could to shore up cash."
He said efforts to offload MIPS and Ensigma in a bid to strengthen the balance sheet "clearly weren't enough", even though both operate in strong potential growth areas that could have delivered lasting revenue accretion to offset the loss of Apple.
"That was a pretty dire scenario, akin to selling off the family silver to keep the estate going a little longer. Now the shutters are up and a buyer sought. A pretty ignominious end to what was a great British tech success story."
Shares in IMG rose 16% on Thursday morning to 143p, their highest since the Apple announcement.
Broker Liberum regarded the start of a formal sale process for the whole group as being "very positive" and upgrade the stock to a 'buy' from a 'hold' and raised its price target from 95p to 193p.
Liberum believes there are likely to be a number of potential buyers for the group including Intel, CEVA, Mediatek, Qualcomm, Apple and "various entities from China".
The final selling price depends on multiple factors including the number of potential buyers, but analysts see a range of valuations from 153p to 233p.
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