November 22, 2012 3:58 am

Imagination bid for MIPS hits snag

Imagination Technologies’ bid for chip designer MIPS Technologies hit a potential snag after the California-based group received a larger cash offer.

CEVA, the Nasdaq-listed semiconductor group, made an “unsolicited” cash offer worth $75m, against the $60m offered by the UK chip designer this month.

MIPS’s board said it was “evaluating” CEVA’s proposal but had not decided whether the offer was “superior” to Imagination’s. Despite the increased cash on offer, the board “continues to recommend the merger” with Imagination.

While Imagination is more than three times the size of CEVA in terms of market capitalisation, CEVA has a stronger cash position, with $156m in net cash at the end of September. By comparison, Imagination had £66m in net cash in April.

Imagination’s original offer came as part of a double-headed deal involving Arm and a consortium of big technology companies.

Under the proposal, Imagination would acquire the operating business of MIPS, as well as 82 patents and the rights to MIPS’s other patents. In a simultaneous deal, MIPS would sell its remaining 498 patents to the Arm-led consortium for $350m, with Arm contributing almost half of the cash required.

Shares in Imagination fell 3.9 per cent to 424p following the announcement.

Lorne Daniel, an analyst at FinnCap, said: “Chasing a CPU firm looked like a defensive move on Imagination’s part; not winning it would leave it even more dependent on Apple business where suppliers are experiencing margin pressure.”

The UK chip designer has suffered a near-20 per cent drop in its share price over the previous six months.

Imagination declined to comment, while MIPS and CEVA could not be reached for comment.

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