U.K. Chip Designer Seeks to Appease Lawmakers About China Ties
(Bloomberg) -- Imagination Technologies Group Plc worked to reassure lawmakers about its commitment to the U.K. in correspondence ahead of a hearing looking into its relationship with a Chinese state-owned asset manager.
The company’s letters to lawmakers were made public ahead of a hearing of Parliament’s cross-party Foreign Affairs Committee on Tuesday, when current and former executives will be questioned about the company’s role in the U.K. tech scene and its ties to China.
Lawmakers are worried that Canyon Bridge Capital Partners, which acquired the chip designer in 2017, plans to shift parts of the business and sensitive technology from the U.K. to China. Canyon Bridge, a private equity fund with offices in California and Beijing, is investing on behalf of a Chinese venture capital fund that, according to regulatory filings, is sponsored by China Reform Fund Management, a state-owned asset manager.
The controversy started after Imagination briefly considered naming China Reform executives to the board.
China Reform has “no control over the company,” Imagination Chief Executive Officer Ray Bingham said in a letter to Tom Tugendhat, the committee’s chairman. The company had considered the new board members in order to “enhance its financial and technical expertise and improve scrutiny of executive decision making.”
Imagination also said that shifting intellectual property to another country was expensive and, since the company is free to license it all over the world, pointless. Chips designed by the company’s technology end up in consumer products, such as TVs and virtual reality systems. They aren’t used by the government or in telecommunications infrastructure, it said.
Imagination announced last month that its previous CEO, Ron Black, was stepping down to be replaced by Bingham, Canyon’s executive chairman. Black was in a standoff with the private equity firm over a proposal to increase Chinese control over Imagination’s board, Sky News had reported previously.
Black and Bingham will appear on Tuesday along with Hossein Yassaie, who was Imagination’s CEO for more than two decades before leaving in 2016. He had warned in a letter on LinkedIn last month that “there is a real risk for the company to lose its U.K. capabilities and base altogether over a period of time,” which had implications for jobs, key intellectual property and “independence in a number of key enabling technologies for our country.”
Imagination also said that Canyon Bridge is considering eventually exiting its investment in the company via an initial public offering, and that it’s considering a listing on the London Stock Exchange, the New York Stock Exchange, Nasdaq or the Star market in Shanghai. But it plans to keep its headquarters in the U.K.
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