Imagination sale set to test UK government over China deals
Canyon Bridge purchase of Hertfordshire-based group comes at key time for ministers
The sale of Imagination Technologies to a China-backed private equity firm is shaping up as a critical test for government ministers over their approach to investment in British businesses by the Chinese.
Imagination Technologies, the Hertfordshire-based maker of mobile graphics processors, agreed a sale to Canyon Bridge, which is backed by state-owned Chinese fund Yitai Capital, in a deal valuing the British chipmaker at about £550m.
Friday’s announcement came days after it emerged that China General Nuclear, a Beijing-controlled company, was set to bid for a stake in the new nuclear power station at Moorside in Cumbria.
The government on Sunday said: “As with any commercially sensitive announcements it would be inappropriate for government to comment on the details of this case.”
It confirmed last week that it would soon announce plans for tougher screening of foreign investments involving “important infrastructure”.
The details of that policy, which was in the Tory manifesto, will be set out in the autumn, according to Greg Clark, the UK business secretary.
Rebecca Long-Bailey, shadow business secretary, said the government had a duty to investigate the implications for national security given that Canyon Bridge had been blocked from carrying out a takeover in the US. “They are within their rights to do that within the current system,” she said.
Theresa May, the prime minister, was sufficiently concerned about the issue that last summer she temporarily halted plans for Hinkley Point, a new nuclear plant in Somerset, because of Chinese involvement in the scheme.
Imagination Technologies put itself up for sale in June, soon after Apple, its largest customer and one of its biggest shareholders, said it would phase out use of its technology in products including the iPhone.
Friday’s 182p-per-share offer is little more than a quarter of Imagination’s 2012 stock price peak of 712.5p, which valued it at close to £2bn.
Palo Alto, California-based Canyon Bridge’s $1.3bn attempt to acquire US chipmaker Lattice Semiconductor was blocked a week and a half ago by President Donald Trump over national security concerns.
Canyon Bridge’s acquisition of Imagination excludes its US unit, MIPS, which is being bought by Tallwood Venture Capital, a Silicon Valley investment group, for $65m. Canyon Bridge’s deal is conditional on the completion of the MIPS sale.
A foreign takeover of Imagination would mark the latest acquisition of a British high-tech company at a time when Mrs May’s government is aiming to portray itself as both open to global markets but eager to scrutinise transactions in sensitive sectors of the British economy.
Arm Holdings, the Cambridge-based chip designer at the heart of most smartphones, was sold last year to SoftBank of Japan for £24bn.
In an attempt to head off potential scrutiny from the UK government, Canyon Bridge pledged to continue to invest in Imagination’s UK research and development capabilities and said it had “no plans” to reduce staff or move the business to another country.
Representatives from Canyon Bridge met British government officials in the run-up to the deal, a spokesperson said.
Imagination’s share price plunged 60 per cent in a single day in April when it revealed Apple would sever its ties.