Imagination Tech.PLC IMG Acquisition

  Imagination Tech.PLC (IMG) - Acquisition

RNS Number : 4055Q
Imagination Technologies Group PLC
06 November 2012




6 November 2012



Imagination Technologies Group plc



Imagination acquires operating business, certain patent properties and license
rights to other patent properties of MIPS Technologies Inc., a leading
provider of CPU architectures and cores, for US$60 million



Imagination Technologies Group plc (LSE: IMG, "Imagination"), a leading
multimedia, communications and embedded processor technology company, has
signed an agreement to acquire the operating business and certain patent
properties, as well as license rights to all of the remaining patent
properties, of MIPS Technologies, Inc. ("MIPS"), a leading provider of CPU
(central processing unit) processor architectures and cores, for a cash
consideration of US$60 million.



In addition to the operating business of MIPS, Imagination's purchase includes
ownership of 82 key patent properties (the "Retained Patent Properties") that
are directly relevant to the MIPS® architecture, and comprehensive license
rights to all of the remaining 498 MIPS' patent properties (the "Divested
Patent Properties"). In a separate transaction, the Divested Patent Properties
are being sold to Bridge Crossing LLC, by MIPS for US$350 million.



Strategic Highlights

· Strengthens Imagination's presence in the substantial and growing CPU
IP segment in both established and new markets

· Combines complementary CPU technologies, resources, expertise and
market presence of Imagination and MIPS to deliver enhanced scale on several
fronts

· The integrated business aims to create a new industry-leading force in
CPU development and licensing

· MIPS is one of the small number of CPU architectures directly supported
by the Android™ OS

· Imagination secures ownership or license rights to the entire MIPS
portfolio of 580 patent properties



Transaction Highlights

· Imagination to retain certain key patent properties directly relevant
to the MIPS architecture

· Royalty-free, perpetual license to be granted to Imagination in respect
of the Divested Patent Properties

· Anticipated to be accretive to Imagination's earnings in FY2014
(excluding one-off items)

· To be financed from existing cash resources

· Expected to close in Q1 CY2013



MIPS Overview

· MIPS pioneered modern 32-bit and 64-bit RISC CPU architectures

· MIPS' customers shipped over 700 million royalty earning units in its
financial year ended 30 June 2012

· MIPS had 56 royalty-paying licensees in its financial year ended 30
June 2012

· MIPS CPU intellectual property core licensing business generated
c.US$60.0 million in revenue in its financial year ended 30 June 2012

· MIPS has recently launched new performance and area efficient Aptiv™
Generation of cores



Hossein Yassaie, Chief Executive Officer, Imagination said:



"MIPS is the company that pioneered the RISC CPU architecture and created an
iconic and widely respected technology. I am absolutely delighted to welcome
MIPS and its team to the Imagination family.



"I believe that the combination of our existing Meta CPU technologies and
activities with MIPS' capabilities will help us to create a new force to be
reckoned with in the CPU IP market. I am confident the acquisition will
accelerate our growth in the substantial CPU IP market across many segments.



"We have been working closely with MIPS for several years now and have a
number of mutual customers and partners. I believe that this transaction will
be welcomed by both companies' customers and the electronics industry at
large."



Sandeep Vij, President and Chief Executive Officer, MIPS said:



"The synergy between Imagination and MIPS makes the proposed transaction a
notable step forward, not only for the two companies, but for the whole
electronics industry.



"It was key for us that our customers and partners were assured of a strong,
long term future for MIPS' architecture, cores and other technologies, and
thanks to this agreement we are confident we have found the ideal partner to
take that forward.



"The industry needs semiconductor IP companies with a breadth of respected
processor architectures for all SoC processing requirements. This acquisition
is a strong and welcome step in addressing such needs."



There will be an analyst conference call at 8.30am GMT - please contact Lucy
Moseley at lucy.moseley@collegehill.com or on telephone +44(0)20 7457 2020 for
details.



Strategic opportunity



The acquisition will bring together two of the world's top five semiconductor
design IP vendors delivering benefits to both companies' customers and
partners as well as generating significant new business and revenue
opportunities.



The acquisition will further strengthen Imagination's position and
opportunities in mobile, TV/set-top-box, consumer, and other embedded markets,
as well as increase its penetration into networking, infrastructure and other
markets where MIPS has enjoyed significant success.



The acquisition of MIPS adds highly respected RISC-based 32-bit and 64-bit CPU
applications processor architectures that complement Imagination's existing
Meta 32-bit embedded CPU IP product family. The architectures have similar
philosophies in several key areas including hardware multi-threading whilst
also bringing highly complementary capabilities. The resulting combined CPU
IP offering will become one of the industry's strongest and most
comprehensive.



The acquisition also adds a well-established ecosystem of customers,
developers, operating systems and tool providers, who will all benefit from
the strengthened position and broader IP offering that the newly combined
business has to offer.



Imagination strongly believes that the selection of each major IP block for
SoCs is a key and complex strategic decision of its customers. Imagination
customers have received and will continue to receive the fullest support
possible when they use Imagination IP alongside CPUs, or other IP cores,
developed internally or licensed from other suppliers. Any customer wishing to
use Imagination's CPUs (including MIPS' CPU), GPUs (graphics processors), VPUs
(video processors) or RPU (radio processors) with IP cores from sources other
than Imagination will be fully supported by Imagination without compromise.
This customer-centric and supportive IP business philosophy has always been
central to Imagination's business model, is valued by Imagination's partners
and has resulted in widespread market penetration.



MIPS



MIPS (www.mips.com) is a US technology company listed on NASDAQ and is a
leading provider of industry-standard processor architectures and cores for
home entertainment, networking, mobile and embedded applications. MIPS is
headquartered in Sunnyvale, CA and has c.160 employees.



The MIPS architecture powers some of the world's most popular electronic
products such as digital televisions, set-top boxes, Blu-ray players,
broadband customer premises equipment (CPE), WiFi access points and routers,
networking infrastructure and portable/mobile communications and entertainment
products.



MIPS' major customers are global semiconductor companies and system original
equipment manufacturers. MIPS' customers pay it license fees for the use of
MIPS' architectural, product and intellectual property rights, as well as
royalties based on processor unit shipments.



In the 12 months to 30 June 2012 MIPS had 56 royalty-paying licensees and
MIPS' customers shipped over 700 million royalty earning units.



In the 12 months to 30 June 2012 the MIPS processor licensing business
generated c.US$60.0 million in revenue and a loss before tax of c.US$9.0
million. MIPS' licensing business had gross assets* of c.US$20 million at 30
September 2012.



*Excluding cash and short term investments



Funding and anticipated financial effects of the acquisition



The total consideration payable by Imagination is US$60 million in cash. The
consideration will be financed from Imagination's existing cash resources.



Based on current business prospects, Imagination anticipates that the
acquisition of MIPS will be marginally dilutive to earnings per share for the
2013 financial year, and accretive to earnings per share in 2014 (excluding
one off items).



As part of the documents relating to the acquisition, MIPS has agreed to hold
back approximately c.US$100 million in cash in respect of various ancillary
transaction matters including a tax liability that is likely to arise as a
result of the sale of the Divested Patent Properties and liabilities of MIPS
relating to employee retention and severance payments.



Terms of the agreement and conditionality



Imagination and MIPS have entered into a definitive acquisition agreement
under the terms of which Imagination intends to acquire the entire issued and
to be issued share capital of MIPS. The agreement is subject to various
conditions which are set out in the acquisition agreement. The acquisition is
conditional, amongst other things, upon completion of the acquisition of the
Patent Portfolio by Bridge Crossing LLC and applicable regulatory approvals as
well as approval of the transaction being obtained from MIPS' shareholders.



Patent Portfolio sale



MIPS has also entered into a definitive acquisition agreement with Bridge
Crossing LLC, whereby Bridge Crossing LLC is to acquire 498 out of 580 of
MIPS' patent properties for US$350 million in cash in a separate transaction
that will complete before Imagination's proposed acquisition of MIPS
completes. The sale of the Divested Patent Properties is also conditional on
MIPS' shareholders approving such sale but it is not conditional on
Imagination completing the acquisition of MIPS.



Expected Timetable



If the conditions to which the acquisition of MIPS is subject (including the
approval of MIPS' shareholders) are satisfied, then the transaction is
expected to complete around Q1 CY2013.



Enquiries



Imagination Technologies Group PLC                    Tel: +44 (0)1923 260 511
Hossein Yassaie, CEO
Richard Smith, CFO
College Hill                                          Tel: +44 (0)20 7457 2020
Adrian Duffield/Kay Larsen
Jefferies International Limited (Financial Advisor to
Imagination)                                          Tel: +44 (0)20 7029 8000
Nick Adams / Daniel Aharoni / Jeffrey Snyder



Imagination

Imagination - a global leader in multimedia and communication technologies -
creates and licenses market-leading processor solutions for graphics, video,
display, embedded processing, multi-standard communications and connectivity,
and cross-platform V.VoIP & VoLTE. These silicon and software intellectual
property solutions for systems-on-chip (SoC) are complemented by an extensive
portfolio of software drivers, developer tools and extensive market and
technology-focused ecosystems. Target markets include mobile phone, handheld
multimedia devices, connected home consumer, tablets/mobile computing, in-car
electronics, telecoms, health, smart energy and connected sensors and
controllers. Imagination's licensees include many of the world's leading
semiconductor, network operator and electronics OEM/ODM companies. Corporate
headquarters are located in the United Kingdom, with sales and R&D offices
worldwide. See: [www.imgtec.com]



Forward-looking statements

This announcement contains (or may contain) certain forward-looking statements
with respect to certain of Imagination's current expectations and projections
about future events. "forward-looking statements". These statements, which
sometimes use words such as "anticipate", "believe", "intend", "estimate",
"expect", "will", "shall", "may", "aim", "predict", "should", "continue" and
words of similar meaning and/or other similar expressions that are predictions
of or indicate future events and/or future trends, reflect the directors'
beliefs and expectations at the date of this announcement and involve a number
of risks, uncertainties and assumptions that could cause actual results to
differ materially from any expected future results or performance expressed or
implied by the forward-looking statement because of diverse factors.

Additional Information and Where to Find It

The proxy statement and other relevant materials, and any other documents to
be filed by MIPS with the SEC, may be obtained free of charge at the SEC's
website at www.sec.gov or from MIPS' website at www.mips.com or by contacting
MIPS Investor Relations at: ir@mips.com.

This communication is being made in respect of the proposed transaction
involving Imagination and MIPS. The proposed transaction will be submitted to
the shareholders of MIPS for their consideration. In connection with the
proposed transaction, MIPS will prepare a proxy statement to be filed with the
U.S. Securities and Exchange Commission (the "SEC"). STOCKHOLDERS OF MIPS ARE
URGED TO READ THE PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION AND ANY
OTHER RELEVANT DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. The definitive proxy statement will be mailed to MIPS'
shareholders.

This announcement is for information purposes only and shall not constitute an
offer to buy, sell, issue or subscribe for, or the solicitation of an offer to
buy, sell, issue, or subscribe for, any securities in Imagination or any other
entity. No securities of Imagination have been or will be registered under the
U.S. Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an exemption from registration thereunder.

Jefferies International Limited, which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting exclusively for
Imagination and no one else in connection with the transaction and this
announcement and will not be responsible to anyone other than Imagination for
providing the protections afforded to clients of Jefferies International
Limited or for providing advice in connection with the transaction or any
matter or arrangement referred to herein.

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           The company news service from the London Stock Exchange

END


ACQUNONRURAARRA -0- Nov/06/2012 07:00 GMT