Imagination Technologies – the British Chipmaker – Is Now Aiming for a Relisting on Public Markets Following Backlash Against Its Chinese Backers

Apr 23, 2020
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Imagination Technologies has attracted a fair quantum of interest over the past couple of years due to the indirect influence that the Chinese state is able to exercise over the UK-based chipmaker. Now, however, the firm’s primary backer – the China-backed private equity firm Canyon Bridge – is mulling the chipmaker's relisting following a severe backlash over its efforts to install directors from a Chinese government investment fund to the board of Imagination Technologies.

As a refresher, Imagination Technologies is a prominent designer of smartphone GPUs and networking routers based on MIPS CPU. At its zenith in 2012, the company enjoyed a hefty market capitalization of £2 billion. However, the chipmaker ran into a proverbial brick wall when Apple (NASDAQ:AAPL) announced in 2017 that it would no longer source GPUs designed by Imagination Technologies. Facing a cash crunch, the British chipmaker agreed to a takeover in September 2017 by the Palo Alto-based private equity fund – Canyon Bridge – for £550 million.

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Bear in mind that Canyon Bridge is, in turn, backed by a state-owned Chinese fund, Yitai Capital. Before setting its sights on Imagination Technologies, Canyon Bridge had attempted to purchase the U.S. chipmaker, Lattice Semiconductor, but was blocked by the Trump administration due to the fund’s clear links with China’s government as well as the Asian giant’s space program. Critics argue that China seeks to become self-sufficient in semiconductors by 2025 and that it has been using acquisitions of Western companies as a prop to attain the pertinent intellectual property.

This brings us to Canyon Bridge’s latest gaffe. According to the reporting by Sky News in April 2020, the fund was pushing for the appointment of four directors on the board of Imagination Technologies with links to China Reform Holdings, a $30 billion Chinese government-controlled venture fund. However, a campaign by the Conservative politician, David Davis, prompted Britain’s culture secretary to dispatch a letter demanding further information. The brouhaha on this matter led to the cancelation of the meeting where the appointment of those four directors was to be approved. It also led to the departure of the chipmaker’s CEO, Ron Black.

Now, it appears that the chipmaker and its backer are actively mulling a relisting. The acting CEO of Imagination Technologies, Ray Bingham, has been quoted today by the Financial Times as saying:

“The objective would be an IPO over the next few years.”

Mr. Bingham added that the company has been approached by the listing authorities in the UK on this subject now that it seems that Apple is again looking to source components from the chipmaker. We reported recently that, as per the agreement published on Imagination Technologies’ website, Apple is looking to enter into a multi-year contract with the company for its PowerVR GPUs provided that their performance meets the iPhone giant’s exacting standards.

Regarding the controversy surrounding the appointment of directors to the company’s board, Mr. Bingham conceded that it was “not a good idea for a number of reasons”. Nonetheless, he asserted that the accusations that were put forth in this matter were “quite wild” and that there was “no need” to transfer Imagination Technologies’ IP to China:

“IP moves around the world by licensing it.”

Mr. Bingham also added that he had provided assurances to the British government of retaining his company’s headquarter in the UK. He also clarified that China Reform provided about a third of Canyon Bridge’s funding.

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