Apple Inc (NASDAQ:AAPL) could be drawn into a bidding war against Intel Corporation (NASDAQ:INTC) and Qualcomm Inc (NASDAQ:QCOM) as London-listed chip maker Imagination Technologies Group Plc (LON:IMG) is put on the auction block.
Imagination Technologies and Apple are ‘in dispute’ and that is a key dynamic in the emerging M&A story. In March, the UK company halved in value when it emerged that Apple had decided to stop using the company’s intellectual property in future products.
A formal sales process was launched in London on Thursday, with Rothschild acting as advisor.
Apple could be vulnerable if someone else acquires Imagination
Janardan Menon, technology analyst for Liberum Capital in London, in a note, said Imagination doesn’t have sufficient resources to litigate with Apple, but, the iPhone maker could be vulnerable depending upon who acquired the Imagination business.
That alone makes Apple a potential acquirer of the company, which is today worth around US$500mln (£400mln), tough the analyst also reckons Apple would also see value in all the group’s IP and teams of engineers.
Qualcomm, which is in its own IP battle with Apple, is another potential buyer of Imagination, according to Menon.
Imagination could be a weapon for Qualcomm
He said: “Qualcomm is in a major spat with Apple which fundamentally questions its longer term licensing model.
“An acquisition of Imagination could be an additional weapon in its fight with Apple, given the existing dispute between Imagination and Apple.”
Intel is another big name linked, by Liberum, to a possible approach - due to its in-process acquisition of Mobileye which utilises Imagination’s MIPS intellectual property.
“Intel, therefore, has a clear interest in supporting MIPS and its future roadmap. Intel is also falling well behind Nvidia and AMD in graphics capability and IPR. The acquisition of PowerVR will help strengthen its internal graphics team and patents,” Menon added.
CEVA Inc (NASDAQ:CEVA), Taiwan based MediaTek Inc (TPE:2454) and a plethora of Chinese buyers were also noted by Liberum as potential acquirers of the company. It is little wonder then, that Liberum sees significant upside to Imagination’s current price.
Menon upgraded its recommendation on the stock to ‘buy’ from ‘hold’ and doubled Liberum’s target price to 193p (current price 142p), though the analyst sees a range of valuations - between 153p and 233p – should a bidding war breakout.