Imagination, which is looking to buy the MIPS business to gain patents and step up its challenge to an increasingly dominant ARM Holdings, said on Wednesday that the MIPS board continues to recommend its offer.

That could change, however, after MIPS said on Tuesday that it will start talks with mobile chip designer CEVA, which has made a $75 million bid, as MIPS believes that proposal could lead to a superior deal.

"Imagination is monitoring the situation and will provide a further update in due course," the British company said in its statement.

Imagination announced its intention to buy MIPS earlier in November.

MIPS technology is in blu-ray players, digital televisions and video games consoles such as the Sony PlayStation 2.

Imagination shares fell 3 percent to 426 pence at the market open on Wednesday.

(Reporting by Sarah Young, Editing by Rosalba O'Brien)

• A Permanent Economic Emergency