Market report: Bid war for chip designer piques City's Imagination

Amid Samsung’s firefighting, Liberum analysts were fuelling speculation that smartphone chip designer Imagination Technologies might be a takeover target.

Tech behemoth Apple, for which Imagination designs graphics chips, walked away from talks with Imagination in March. But the Takeover Panel’s rule which prevents companies from coming back to the table for six months has expired, leaving Apple free to reopen talks.

The £24 billion takeover of chip-designer ARM Holdings by Japan’s SoftBank suggests Apple could face a scrap for Imagination, according to Liberum’s Janardan Menon.

“We believe Imagination is an attractive and desirable acquisition target for a variety of companies in the broader technology sector,” the analyst said.

He added that potential buyers include web giant Google, smartphone heavyweights Samsung and Huawei, and chip-makers Intel, Qualcomm, Spreadtrum, CEVA and MediaTek.

Tsinghua, which bought a stake in the company this year, was also named as a potential suitor.

Menon suggested SoftBank’s pricey deal for ARM could be pave the way for more expensive takeovers.

The speculation, along with higher forecasts on the back of stronger demand for the iPhone7 and a weaker sterling, boosted the shares by 16.75p, or 6.6%, to 271.75p — their highest level since 2013.

The FTSE 100 flirted with record highs, up 11.29 points at 7108.79 — above its highest closing price by around five points, but just below the intra-day record.

The market became more confident that struggling Pearson, up 8p at 820.5p, can avoid a profit warning when it reports on third-quarter trading next week.

Investment bank Jefferies lent its support to the textbook publisher today, arguing that the shares look “cheap”.

Victrex surged 129p, or 8%, to 1751p after a “good finish to 2016” for the high-performance plastics manufacturer’s car and plane parts business and a robust trading performance from its oil and gas division.