Beijing-backed fund makes a play for chip pioneer Imagination

Imagination grew rapidly on the back of the iPhone but Apple has decided to design its own graphics chips
Imagination grew rapidly on the back of the iPhone but Apple has decided to design its own graphics chips

The troubled British microchip ­designer Imagination Technologies has become a takeover target for a private equity fund backed by the Chinese government.

Canyon Bridge Capital Partners, which is based in Silicon Valley but funded by authorities in Beijing, has held talks about a potential bid for ­Imagination or parts of its business, The Sunday Telegraph can reveal.

The discussions are at an early stage and Canyon Bridge is understood to be among a handful of relatively unknown Chinese investors eyeing one of Britain’s few remaining independent semiconductor players. City sources said that Canyon Bridge was viewed as a  serious potential bidder. Last year it agreed to pay $1.3bn (£1bn) for Lattice Semiconductor, a US maker of specialised microchips. 

That deal has provoked unease over the private equity firm’s links to the Chinese government. Beijing has made increased sway in the global high technology market a policy priority and Chinese investors have been on a buying spree.

Imagination Tech's headquarters
Imagination Tech's headquarters Credit: Reuters

Canyon Bridge’s Lattice takeover is under investigation by the Committee on Foreign Investment in the United States, a government panel that has previously blocked Chinese deals over national security concerns.

A bid for Imagination could be a test of the British Government’s readiness to intervene in takeovers.

The Conservative manifesto promised new measures to block foreign ownership of sensitive companies and the Queen’s Speech included proposals “to ensure critical national infrastructure is protected to safeguard national security”. 

Imagination was forced to put itself on the block in June after Apple said it would stop using its graphics technology in the iPhone.

The loss of its biggest customer triggered a 70pc collapse in the Hertfordshire-based company’s shares. Rothschild was called in to mount a salvage operation for investors.

The auction has attracted international interest, although it is understood Chinese investors and potential trade buyers have been most active. Smartphone manufacturers in the Far East make up the bulk of Imagination’s remaining graphics customers.

City sources said ARM, the British smartphone chip giant now owned by Japan’s SoftBank, has considered a bid for Imagination and ruled itself out.

Imagination, which now has a stock market value shy of £400m, declined to comment.

At its peak the company was worth around £2bn.

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