Apple confirms talks with Imagination Tech but not planning bid

Apple has admitted holding talks with troubled UK processor developer Imagination Technologies but said it was not planning a purchase.

Shares in ImgTech had climbed earlier on Tuesday on speculation about a possible deal, fuelled in part by Apple's near-8.4% stake in the UK company, but crashed back to earth after confirmation at 1520 GMT.

"From time to time, Apple talks with companies about potential acquisitions. We had some discussions with Imagination, but we do not plan to make an offer for the company at this time," the US technology giant said in a short statement.

This follows a February reports that the smartphone chip designer has held further talks with potential US suitor Rambus about a potential £850m bid, after the Nasdaq-listed company was rejected when it made an informal bid last year.

Broker Aviate said a deal would make strategic sense, allowing Apple to optimise the efficiency and power consumption of its devices, Reuters reported.

Credit Suisse commented on the possible impact on Imagination of Monday's launch of the new Apple iPhone SE:

"While we see Apple launch as a positive for Imagination, we still model small decline in Imagination’s GPU units globally (475m in 2016 declining to 455m in 208) which is driven by continued share loss.. as ARM continues to penetrate into the high end with recent launches like Helio X20/X25 and P10/P20."

Last week the UK-listed company announced it would accelerate restructuring plans to reduce ongoing costs by a total of£27.5m over the next financial year, while it has received "considerable interest" from potential buyers for consumer electronics business Pure, which it aims to sell by the end of 2016.

ImgTech said it plans to divest or shut down non-core and/or cash consuming units as well as further reduce overheads, to focus on its core three businesses: graphics and multimedia (PowerVR), processing (MIPS) and connectivity (Ensigma).