Analysis

MIPS Technologies Agrees to Sale of Patent Properties to AST and Acquisition by Imagination Technologies

7th November 2012
ES Admin
0
MIPS Technologies today announced it has entered into separate definitive agreements with Bridge Crossing, an acquisition vehicle of Allied Security Trust, and Imagination Technologies Group with net proceeds of approximately $7.31 per share in cash to each holder of MIPS common stock.
The total value of the transaction represents a 40% premium to the closing price on April 11, 2012, the day prior to the first public rumor of a potential sale of MIPS.

Bridge Crossing will acquire 498 of MIPS’ total 580 patent assets for gross proceeds of $350 million. MIPS will retain the remaining 82 patent properties that are directly relevant and key to the MIPS architecture, and will also be granted a royalty-free, perpetual license under all of the patent properties sold to Bridge Crossing. MIPS will also provide a restricted license to Bridge Crossing under the 82 retained patent properties. Subject to consummation of the Bridge Crossing transaction, Imagination will acquire the operating business of MIPS, the 82 aforementioned patent properties, and license rights to all of the remaining patent properties of MIPS for $60 million.

Both transactions are subject to customary closing conditions, including the approval of MIPS’ shareholders, who will vote separately on each of the transactions. Approval of the Bridge Crossing transaction is not subject to shareholder approval of the Imagination acquisition. The proceeds of the transactions, which are subject to a holdback of approximately $100 million to cover tax and other liabilities, will be distributed to MIPS shareholders on a pro-rata basis through a recapitalization of MIPS common stock.

“After a thorough review of a wide range of alternatives to enhance shareholder value, our Board of Directors concluded that the best alternative for the Company would be the sale of patent properties to a consortium formed by AST, and a sale of the Company to Imagination. Importantly, as part of Imagination, the MIPS architecture will continue to be supported, and protected by MIPS patents. This highly successful outcome builds upon the rich heritage of the MIPS processor architecture, while effectively monetizing the Company’s valuable patent portfolio,” said Sandeep Vij, CEO of MIPS.

Mr. Vij continued, “By combining the technologies and skills of MIPS and Imagination, a leading multimedia, communications and embedded processor technology company, we believe that we can together create a powerful, well-differentiated and highly influential alternative to existing CPUs in the market. The move is highly strategic and presents clear benefits to MIPS’ customers, employees, and partners.”

According to Hossein Yassaie, CEO, Imagination Technologies, “The MIPS architecture is widely respected, and is complementary to Imagination’s existing CPU capabilities. I believe that this proposed transaction will be welcomed by both companies’ customers, including our mutual partners, and by the electronics industry at large. Post deal closure, Imagination will continue to support and expand the MIPS architecture and ecosystem, with the combined effort aiming to create a new industry-leading force in CPU development and licensing.”

The sale of the MIPS patent properties has been unanimously approved by the Board of Directors of MIPS and by the CEO of Bridge Crossing, and is subject to customary closing conditions, including the approval of MIPS’ shareholders, voting separately from approval of the sale of the Company to Imagination, and not conditioned on the approval or consummation of that sale. The subsequent sale of the Company has been unanimously approved by the Boards of Directors of MIPS and Imagination, and is subject to customary closing conditions, including the separate approval of MIPS’ shareholders and consummation of the Bridge Crossing patent property sale. Neither transaction is subject to any financing condition. Bridge Crossing has deposited the full amount of the purchase price into an escrow account to fund the patent property sale transaction. MIPS anticipates that the transactions will close within Q1 CY2013.

J.P. Morgan is acting as exclusive financial advisor; Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor; and Ocean Tomo is acting as intellectual property advisor to MIPS. Fenwick & West LLP and Morrison & Foerster LLC are acting as legal advisors to AST. Jefferies is acting as exclusive financial advisor, and DLA Piper LLP is acting as legal advisor to Imagination.

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