Imagination Technologies targets HelloSoft in move to bolster technology base

Imagination Technologies Group (LON:IMG) , the group that make processor technologies for the multimedia and communications markets, today said it was buying HelloSoft in a deal worth up to $47m (£29.5m). The move will give Imagination access to the California-based company’s highly respected technologies that are used in video and voice-over-internet protocol and wireless LAN technologies.

Under the terms of the purchase, Imagination will pay approximately $20.2m in cash upfront and up to $26.9m over three years depending on performance – of which $9.5m will be in new shares and up to $17.4m in cash. The cash element is being funded through a placing of up to 12,208,950 new shares, or 5% of Imagination’s share capital. Surplus cash from the fundraising has been earmarked for additional potential acquisitions. Shares in Imagination fell by 3% to 325p today, compounding a substantial fall from 411p since last week.

Elsewhere, the company reported that trading in the first half of the year to October 31 had been in line with expectations. It said it was seeing strong demand in its Technology business and had achieved good growth in licensing revenue and strong growth in royalty unit volume, with a current expectation approaching 100m partner chip shipments during the period. Trading in the PURE division, which focuses on developing DAB digital and connected radios, continued to be challenging, particularly in certain international markets. Revenues are now expected to show a decline compared with the first half of the previous financial year.

By acquiring HelloSoft, Imagination is moving to boost its own POWERVR multimedia processing IP cores to enable optimised end-to-end media-over-internet protocol solutions. The deal secures full control of the WiFi technology and roadmap that Imagination is already using in relation to its Universal Programmable Communication Platform. It also secures access to new channels in the telecommunications market to operators and service providers and product companies which operate at a higher level in the overall technology value chain. HelloSoft's founder and CEO, Krishna Yarlagadda will become president of Imagination Technologies USA.

Hossein Yassaie, Imagination’s chief executive, said: “HelloSoft has exciting technology which together with our market leading multimedia and processing capabilities will enable us to deliver media (audio, video, voice and graphics) to connected devices whether mobile, within homes or across enterprises. We expect to deliver other complementary and strategic combinations in due course. The remaining funds will provide us with the financial flexibility to carry out other complementary and strategic technology acquisitions in relation to our visual and graphics intellectual property business area.”