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Imagination Technologies jumps 13% as Chinese firm takes 3% stake

Discussion in 'Market News' started by Lily, May 9, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Move by state backed Tsinghua Unigroup sparks renewed takeover talk

    IPhone supplier Imagination Technologies has jumped nearly 13% following news that a Chinese state-backed business has taken a 3% stake in the chip designer.

    The news of the move by Tsinghua Unigroup has prompted speculation the company - which also counts Apple as a shareholder - could be a possible takeover target. Earlier this year Apple said it had held talks but did not plan to make an offer “at this time.” Analyst Roger Phillips at Investec said:

    The announcement of Tsinghua Unigroup as 3% holders will likely reignite M&A speculation around Imagination once again. We update our numbers to account for new management cost cutting and Apple’s quarterly numbers last week. The latter were not pretty for iPhone units for the June quarter, and there are a few tricky quarters in store here, but Mediatek share regain, Spreadtrum progress and management action on cost should offset. We remain buyers with an upgraded 200p price target.

    Tsinghua Unigroup’s acquisition of a 3% stake is interesting considering this is the Chinese state-backed technology holding company that acquired RDA Microelectronics and Spreadtrum... The idea that the Chinese state’s acquisition of intellectual property is a strategic priority, and that Imagination could be a target, has been floated before, but considered slightly left-field. As a result, the announcement brings this idea to the forefront, with Tsinghua having stated in press reports that it expects to invest around $47bn in the next five years, and reignites M&A speculation over Imagination more generally.

    Tsinghua Holdings has taken a 3% stake in Imagination. Tsinghua is a near $30bn Chinese state-owned fund that has been buying western technology companies. Tsinghua has already acquired Spreadtrum, RDA, HP’s server business and tried to buy Micron, Spil and Western Digital.

    We presume Apple (owns 8%) would not let Imagination’s technology go to China. This may ignite a sale process.

    Continue reading...

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