A 13%-plus jump in the share price, there's clearly some investors willing to bet that graphics chip design specialist Imagination Technologies (IMG) is effectively 'in-play'. The rally in the stock (up 20p, or 13.2%, to 171p) comes after the announcement that a Chinese technology fund has snapped up a 3% (and change) stake in the Hertfordshire business.
The Chinese group, called Tsinghua Unigroup, is effectively a rough $30 billion state-owned technology fund but what's really interesting about it is its own ambitions to become one of the world's biggest chips makers itself. It has been very busy hoovering up several chip tech businesses across the US and Europe, buying Spreadtrum, RDA, HP’s server business, it even tried to buy Micron, Spil and Western Digital.
Imagination is in the middle of a strategic review and restructuring as it looks to slash costs and, as SHARES has previously stated, looks ripe for a takeover.
At this juncture we can only speculate as to the true intentions of Tsinghua Unigroup, but it is not inconceivable that this is the first step designed to woo existing major shareholders and management of Imagination, giving it a meaningful at the table of any future talks.
One fly in the ointment could be Apple (AAPL), the technology colossus and, arguably, Imagination's biggest and most important customer. The UK firm supplies graphic chip unit (GPU) designs for many of Apple's products, not to mention many other leading gaming and displays manufacturers. The US group is also an 8.3% stake owner.
Whether Apple would be happy to see a core component supplier fall into Chinese hands remains open to debate, and many analysts think it unlikely. But as Liberum number crunchers point out, this could prove the starting gun on a long-mooted takeover battle for Imagination, as SHARES has flagged several times over the past year or more, more recently in February.
'The last four intellectual property acquisitions (Tensilica, MIPS, Arc, Artisan) have been at 7.7-times enterprise value/sales on average. Imagination trades on 3.3-times enterprise value/sales,' adds Liberum.
