Imagination will sell itself to Canyon Bridge, while simultaneously agreeing to sell MIPS to Tallwood VC. Has Imagination structured both deals in such a way to let Canyon Bridge -China's government-backed buyout - have access to MIPS CPU IP?
TOKYO — Semiconductor industry watchers are pointedly curious about the fine print of two separate agreements governing the sale of U.K.-based IP licensor Imagination Technologies.
The sales of imagination was widely anticipated after the firm put itself up for sale in June, two months after its largest customer, Apple, said it would phase out use of Imagination technology in products that include the iPhone. But the deals announced Friday (Sept. 22), in which Imagination sold itself to Canyon Bridge Capital Partners and MIPS to Tallwood Venure Capital, left market watchers with several questions.
First, did Imagination structure both agreements in such a way as to allow Canyon Bridge — a private equity firm backed in part by the Chinese government — to have access to MIPS CPU IP?
More specifically, do the two VCs — which are buying Imagination and MIPS independently — know each other?
Further, by agreeing to sell, has Imagination practically opened the backdoor for Canyon Bridge to access MIPS CPU IP and patents, without review by the Committee on Foreign Investment in the United States (CFIUS)?
Imagination Technologies last Friday unveiled two separate deals, in which the Hertfordshire, U.K.-based company sold itself to Canyon Bridge, while simultaneously agreeing to sell MIPS to Tallwood Venture Capital.
China’s long-standing love affair with MIPS is no secret. Chinese vendors have been using MIPS for years and Beijing has reportedly said it wants to use MIPS architecture for all future government-sponsored projects.
Specifics of the deals
First, here are some specifics of last Friday’s announcements.
Imagination announced it is selling itself in an all-cash deal worth 550 million pounds ($742.5 million) to Canyon Bridge Capital Partners, the VC firm whose proposal to buy Lattice Semiconductor was recently blocked by U.S. President Donald Trump.
Imagination announced on the same day that it had agreed to sell the company’s global MIPS CPU business for $65 million to Tallwood Venture Capital, an investment firm with offices in Palo Alto, Calif., and Wuxi, southern China.
Although a majority of MIPS patents were sold in 2013 to Bridge Crossing, which was created by a member-based patent holding company called Allied Security Trust, all processor-specific patents and the other parts of MIPS Technologies were sold to Imagination.
Imagination explained in its press release that the completion of the MIPS disposal is a condition of Canyon Bridge’s acquisition.
Andrew Heath, CEO of Imagination said, in a statement, “The acquisition [by Canyon Bridge] will ensure that Imagination — with its strong growth prospects — remains an independent IP licensing business, based in the U.K., but operating around the world.”
Had Imagination kept MIPS, Canyon Bridge’s acquisition of Imagination would certainly invite CFIUS scrutiny.
The MIPS CPU business, according to Imagination, includes all MIPS intellectual property and patents. The MIPS IP and patents were developed in the United States and they belong to Imagination's U.S. business unit.
Left unclear at this point is if Imagination’s MIPS divestment to Tallwood might face CFIUS review.
Industry skeptics wonder if Canyon Bridge — already barred by the U.S. government from buying Lattice — plans to put an agreement in place, for example, to get perpetual license of all of MIPS IPs from Tallwood. If so, Canyon Bridge, as one of the Chinese government’s semi-private entities, could at long last get a grip on MIPS.
However, at this point, there is no proof that Imagination might have coordinated the two deals specifically to help Canyon Bridge fly under CFIUS’ radar in its quest for MIPS IPs. Financial deals like this — especially when involving players from the wild, wild East of China — are an elusive quarry for regulators.