ARC revives plans for £400m float as tech market returns to favour

The recovery in the technology market was underlined yesterday when ARC International, a designer of micro-processor cores and related intellectual property, revived plans for a £400m stock market flotation in the autumn.

The recovery in the technology market was underlined yesterday when ARC International, a designer of micro-processor cores and related intellectual property, revived plans for a £400m stock market flotation in the autumn.

ARC's biggest shareholders are Apax Partners and Nomura, which together have a 25 per cent interest. The company plans to sell about £100m of stock with three-quarters of the issue being new shares. The remainder will be sold by institutional, venture capital and hedge fund investors.

Bob Terwilliger, ARC's chief executive, owns about 5 per cent of the company. Other employees have a combined 15 per cent stake.

Mr Terwilliger said: "ARC is really positioned in a very, very explosive market area. The embedded marketplace is huge. To put it in perspective, Intel's [micro-processor] production represents only 1 per cent of the total [embedded] market."

ARC's pathfinder prospectus is expected to be published in the next four to eight weeks. UK and overseas institutions will be offered London-listed stock, although private retail investors will be excluded.

Commenting on the absence of a retail element, Mr Terwilliger said: "We feel like the institutional investors, particularly in London and the US, have already invested in ARM, Parthus and Bookham Technology, and are comfortable with that. We are attracted to the buy and holds." He added: "We believe there is a very long-term play here as opposed to a short-term play."

The funds will be used to expand sales and marketing operations. They could also be used for acquisitions, though shares are likely to feature in any major takeover.

ARC investors will see parallels with ARM Holdings, the embedded chip designer whose intellectual property is found in most mobile phones. In addition to having similar names, the companies share the same business model, based on licensing intellectual property for chips.

ARM, of course, has emerged as one the stock market's brightest stars. Since floating in early 1998, its shares have risen around twenty-fold to a current market capitalisation of £7.6bn.

Dataquest, a technology research firm, estimates the semiconductor intellectual property market to have recorded sales of $420m in 1999, although that total is expected to hit $3bn in 2004. ARM led that market in 1999 with sales of $88.5m, while ARC is estimated to be in twelfth position with sales of $5m.

ARC began in 1990 as an engineering services company with Nintendo, Sony and Apple among its early clients. The switch to intellectual property licensing occurred in 1996. ARC has issued 50 licences to users. About 150 products are being manufactured or being designed to use the ARC technology. One product using its designs is Toshiba's M60 digital camera. The technology is thought to have cut the product's time to market by nearly four months, so paving the way for the M60 to appear in shops before Christmas.

ARC employs 230 staff of whom half are in Britain at its Elstree, Hertfordshire, headquarters. The company also has offices in North America, Germany and Israel.