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Tsinghua Unigroup buys stake in Imagination Technologies

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Tsinghua Unigroup buys stake in Imagination Technologies

Tsinghua Unigroup, a Chinese government-backed technology firm has taken 3 percent stake in British chip company Imagination Technologies, raising the prospect of a battle with Apple for the company that designs a crucial element of the iPhone. The shares of Imagination jumped as high as 15 percent on the back of the news.

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“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,” says Roger Phillips, analyst at Investec.

Earlier this year, Apple issued a statement admitting that it had "some discussions" with Imagination, but clarified that it did not "plan to make an offer for the company at this time." Apple already owns an 8.5 percent stake in the company, more than twice that of Tsinghua's new share.

Liberum Capital’s EoinLambe said: “We presume Apple would not let Imagination’s technology go to China. This may ignite a sale process.”

Imagination, which licenses its intellectual property to chip manufacturers, already counts two of Tsinghua’s subsidiaries as customers, while two existing customers – Intel and Apple –both have stakes in the company.

The prospect of a sale has, however, brightened as Imagination undergoes a major restructuring amid repeated losses. Sir HosseinYassaie, its chief executive of 18 years, left the company in February amid shareholder disquiet, and the company is set to sell off parts of its business including the digital radio division, Pure.