TOKYO — If Canyon Bridge Capital Partners (Palo Alto, Calif.) succeeds in purchasing Imagination Technologies without a hitch, it will be the very first time the Chinese government-backed buyout fund has closed any deal since the firm was founded in 2016.
Ray Bingham
To acquire the U.K.-based Imagination, Canyon Bridge must get British government approval. But the big monkey wrench in the works might be the Committee on Foreign Investment in the United States (CFIUS). In an interview with EE Times last week, Ray Bingham, partner at Canyon Bridge, told us he doesn’t believe the Imagination deal will be reviewed by CFIUS, because Imagination is U.K.-based. But he added, “You never know.”
Among all VCs, Canyon Bridge should well know the pitfalls in the current political climate. Bingham noted that “many technology deals have stalled in D.C."
Last November, Canyon Bridge agreed to buy Lattice for $1.3 billion. The VC firm, however, had to submit the proposed deal for CFIUS review three times, and eventually took its case directly to the White House this summer. That deal got promptly struck down by the U.S. President in mid September.
In barring Canyon Bridge from buying Lattice, Treasury Secretary Steven Mnuchin said the move reflected concerns about the transfer of intellectual property, Beijing’s role in the deal, the importance of semiconductor supply-chain integrity to the U.S. government, and the government’s use of Lattice products.
So what lessons, if any, did Canyon Bridge learn? And how much of the Trump administration’s misgivings, which led them to deny the Lattice acquisition, might apply to the new Canyon Bridge-Imagination deal?
EE Times talked with Bingham over the phone last Friday. Our conversation ranged from Canyon Bridge’s relationship with Tallwood Venture Capital to how Canyon Bridge plans to rebuild Imagination, why Canyon Bridge didn’t make an attempt to buy Imagination as a whole including MIPS, and most important, who Canyon Bridge really is.
“Obviously, Canyon Bridge would have liked to buy Imagination with MIPS intact,” Bingham acknowledged. But knowing that MIPS is Imagination’s U.S. business, he said, Canyon Bridge decided“not to get tangled up” with CFIUS review. The VC firm’s bid to buy Lattice proved long and arduous, with a negative result.
Asked if Canyon Bridge ended up paying more for Imagination without MIPS than with MIPS [because the share price was lower than the buyout price, even without MIPS], Bingham said, “Acquisition deals are always like that…you often pay more than the share price.” He also added that there were multiple bidders both for Imagination and MIPS, thus naturally driving up the price. But clearly, the intention behind separating MIPS from Canyon Bridge’s Imagination acquisition deal was to avoid CFIUS review, as Bingham explained.
Year-to-Date Imagination Technologies Stock Chart (Source: Yahoo Finance)
MIPS in PowerVR IP and Ensigma IP
Once the deal is consummated, Imagination will no longer have MIPS IP, because in a two-pronged deal, Imagination will have first sold MIPS to Tallwood Venture Capital.
But here’s the thing. Imagination’s key graphics and communication IP — PowerVR and Ensigma — use MIPS core.
How is Canyon Bridge going to deal with that?
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