UK Edition
Sale of chip pioneer Imagination raises China fears
The Government has expressed concern over a potential takeover of the British iPhone microchip designer by a private equity firm backed by China.
Officials have made informal contact with bankers working on the auction of Imagination Technologies about interest from Canyon Bridge Capital Partners, which is based in Silicon Valley but funded by Beijing authorities. It is not clear whether the Government would attempt to block a sale over security concerns, with its involvement so far described by a source as “lots of bluster and nothing very helpful”.
Imagination has put itself up for sale after Apple pulled the plug on the long-standing graphics technology deal that has been the bedrock of its business, sending the shares tumbling 70pc.
The first iPhone to rely on microchips designed in-house by the Silicon Valley giant was unveiled last week.
The Sunday Telegraph revealed the approach from Canyon Bridge in July. The firm is working with advisers at Citigroup on a potential bid. Security fears have already disrupted Canyon Bridge’s microchip ambitions in the United States.
President Trump last week blocked an agreed $1.3bn (£0.96bn) takeover of Lattice Semiconductor, a hi-tech manufacturer based in Oregon.
Steven Mnuchin, US treasury secretary, said the move was consistent with the administration’s “commitment to take all actions necessary to ensure the protection of US national security”.
It sparked fury in Beijing, where the communist party has made international development of the Chinese microchip industry a central plank of its economic plans. Officials said “security checks on a sensitive investment is a nation’s legitimate right, but it shouldn’t be used as a protectionist tool”.
It was one of a handful of times in the last three decades when presidential authority has been used to block a foreign takeover.
In an attempt to avoid Trump scrutiny over Imagination, Canyon Bridge is understood to be focused on a potential bid that would exclude its US unit.
The Hertfordshire-based company, once valued on the stock market at nearly £2bn, paid $100m for the business in 2012 in an ill-fated attempt to expand beyond graphics technology and challenge ARM in the market for general mobile processors. The planned takeover would be a test of Theresa May’s determination to subject foreign takeovers in key sectors of the economy to more study.
The Conservative manifesto promised new powers so that “the Government can require a bid to be paused to allow greater scrutiny”.
However, Mrs May’s weak showing at the general election meant the proposals did not appear in the Queen’s Speech.
Canyon Bridge could yet face a rival bid from an industry player such as Rambus, a US memory microchip giant seeking to diversify. ARM has ruled out a bid, according to sources familiar with its plans.