Imagination to buy Caustic Graphics for $27 million

Imagination Technologies has announced plans to buy Caustic Graphics for $27 million.

The all-cash deal will see Caustic’s ray-tracing graphics technology incorporated into Imagination’s graphics processing units and will leave Caustic with no debt or other financial liabilities.

The ray-tracing technology is a method for rendering 3D photorealistic graphics in a way that is more true to the real thing than current graphics techniques. Caustic has patented hardware and software relating to the technology, which could become pivotal in the growing 3D movie and game industry. Imagination will acquire these patents as part of the deal.

Both Caustic and Imagination believe the technology is more cost effective and utilises less power than standard graphics methods, which Imagination may integrate with its PowerVR graphics core IPs, which are employed by a number of leading companies, including NEC, STMicro and Apple.

Imagination said that ray-tracing is traditionally a technology employed in specialised markets, but added: “We intend to change that.” Caustic also believes the buyout can help brings its technology to a broader customer base.

Caustic had gross assets of $1 million on June 30 of this year and it believes it will earn royalties and software revenue for Imagination in the second half of Imagination’s fiscal 2012, which ends on April 30. However, Imagination does not expect real earnings to come in from Caustic until fiscal 2013.

The acquisition is expected to close at the end of this year, subject to standard conditions.