China Backed Firm Buys UKs Imagination Tech

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What's going on?

Canyon Bridge, an investment firm with ties to the Chinese government, announced late on Friday that it had agreed to buy Britains Imagination Technologies the soon-to-be-former manufacturer of the graphical processing units (GPUs) used in Apple products like the iPhone.

What does this mean?

Over the past few years, Apple has invested more and more into developing its own processor technologies (the new iPhone 8 is the first to use in-house GPUs). Accordingly, Apple announced back in April that it would be cancelling its supply contracts with Imagination, which had made these parts for Apple for almost ten years.


That cancellation meant Imagination would be losing its most important source of revenue. Imaginations stock fell by 60% at the time, and it decided to put itself up for sale. Now its found a buyer: Canyon Bridge.

Why should I care?

 

For markets: Its only a good deal for some of Imaginations investors.

Canyon Bridge is offering around $750 (550) million to acquire Imagination, which means that Imagination shareholders will be paid 1.82 per share. Thats 42% more than what it cost to buy a single share of the company on the open market on Friday and thus is a hefty premium. However, Canyons offer price is only about a quarter of what the company was worth back in 2012 locking in a big loss for investors that have been with Imagination for a long time.


The bigger picture: Geopolitical concerns come into play here.

Canyon had previously tried to buy a US-based chipmaker, but the US government blocked the deal on national security grounds. In this instance, Imagination is selling its US division prior to the takeover by Canyon, so the US government wont have to give its approval of Canyons acquisition (because there will be no US business involved). So far, it appears as though the British government will not challenge the deal, although that could change…

Originally posted as part of the Finimize daily email.

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