Imagination Soars as Buyer Interest Spurs Formal Sale Talks

(Bloomberg) -- Imagination Technologies Group Plc, the U.K. chip designer mired in an intellectual property dispute with Apple Inc., said it has received takeover interest from several parties in recent weeks, prompting its board to start a formal sale process. The stock jumped.

Imagination Technologies has initiated preliminary talks with potential bidders and is being advised by Rothschild & Co., the Kings Langley, England-based company said in a statement Thursday. The sale process of its MIPS and Ensigma units, begun in May, is progressing and Imagination has received indicative proposals for both divisions, it said.

Intel Corp., Ceva Inc. and MediaTek Inc. as well as some Chinese companies may be interested in bidding, Janardan Menon, an analyst at Liberum Capital Ltd. in London, said in a note to clients. Liberum, which had cut its rating on the stock to hold as it regarded the unit sale plans “as a sub-optimal solution,” put its recommendation under review on Thursday, saying “the valuation of the entire group is likely to be significantly above the current price in the event of a complete sale.”

Shares of Imagination soared at the U.K. open, climbing as much as 21 percent in the biggest intraday increase since December. The shares were up 17 percent at 145 pence as of 9:11 a.m. in London.

The stock had plunged 51 percent this year through Wednesday amid a spiraling dispute with its biggest customer. The U.K. company, which relies on the iPhone maker for about 50 percent of its sales, on April 3 issued a statement revealing Apple will stop using its intellectual property in new products. A month later it said it had been unable to make satisfactory progress with the U.S. technology giant and decided to sell assets after a strategy review.

Imagination Technologies risks losing future royalty payments from Apple, which had previously warned the U.K. supplier that it will cease using its graphics technology for new products, including phones, tablets, and watches, in 15 months to 2 years.

Apple, which owns an 8.1 percent stake in Imagination Technologies, considered acquiring the U.K. supplier as recently as last year.

--With assistance from James Cone

To contact the reporter on this story: Angela Cullen in Frankfurt at acullen8@bloomberg.net.

To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net, Ville Heiskanen, Nate Lanxon