MIPS Carved Up and Sold to Imagination Technologies and AST for a Combined $410M Deal
11/6/2012 by: Anshel Sag
Today, MIPS Technologies [NASDAQ:MIPS] announced that their patent portfolio along with assets and business operations would be split up among Imagination Technologies [LON:IMG] and Allied Securities Trust (AST for short). The deal totals $410 million and is split up between $350 million from AST for 498 of 580 of MIPS' patents, while IMG pays $60 million for the remaining 82 patents that are directly attributable to the MIPS CPU architecture as well as MIPS' business operations.
This combined price represents a 40% premium over the price of the stock from back in April, before rumors of MIPS' potential acquisition had pumped up the stock's price. That rumor had larger companies like AMD being potential suitors, which could have still be very likely but didn't end up materializing.
AST is a consortium of companies that has a history of buying up patents and then going and selling them off or licensing them with the company that they create to initially acquire those patents. They have a nice little list available here of all of the different patent LLCs they've created and then sold off. AST definitely has hints of being a patent troll, however, they do set themselves up as a company with some very notable members. Additionally, Both transactions will be subject to standard closing procedures, including the approval of both deals separately by MIPS' shareholders. The IMG acquisition of MIPS will not be subject to the approval of the AST acquisition of patents. 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.
Interestingly, not everyone is happy about this deal as there has already been a lawsuit announced to investigate MIPS for possible breach of fiduciary responsibilities.
Looking at this acquisition there are a few interesting details that may affect the futures of some companies. While we don't know the whole full extent of MIPS' patent portfolio that they had sold off, we do know that there were multiple companies wanting to acquire it. In addition to that, we are somewhat dismayed to see that the vast majority of MIPS' patents will be effectively given to a patent consortium who will either go along and sue companies that they believe to be infringing or try to sell the patents to a company that will do the same.
In addition to that, we are seeing that Imagination Technologies, traditionally a graphics company has not decided that they want to expand themselves into processors as well. Imagination technologies already has a pretty impressive grip on mobile graphics technologies with their GPU IP located in Apple and Samsung among many others. Now, with CPU IP, we aren't entirely sure what Imagination Technologies will do, but since they're heavily involved in mobile we wouldn't be surprised to see them trying to license MIPS' architecture more broadly across the industry as well. Currently, MIPS' architecture is taking a back seat to ARM's architecture and Intel's x86 with the majority of the world's processors being one or the other.
We are happy, though, to see that Imagination Technologies is not only buying up the MIPS architecture but also taking over business operations meaning that the entire company will not suddenly close its doors once the deal is completed. There is still a likely possibility that Imagination Technologies will close those business operations, but with someone taking them over, there's a chance that some people will still be able to keep their jobs.
MIPS, Imagination Technologies, Embedded Processors, Smartphone, Tablets, Processors, Patents, Bridge Crossing LLC, Allied Trust
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