LONDON (Reuters) - Imagination Technologies, the British firm that lost 70 percent of its value after being ditched by its biggest customer Apple, put itself up for sale on Thursday in a disappointing end to a once-great European tech success story.

Founded in 1985 and listed in 1994, Imagination has been rocked by Apple's announcement in April that it was developing its own graphics chips and would no longer use Imagination's processing designs in 15 months to two years time.

Apple's decision, which analysts said posed an existential threat to the company, sent Imagination's shares plummeting 70 percent on April 3 and they have barely recovered since.

The stock jumped as much as 21 percent on Thursday, however, after the sale announcement to 149.5 pence, giving the company a market capitalization of 425 million pounds ($538 million).

Analysts said potential buyers could include Intel, Qualcomm, Mediatek, CEVA and various entities from China, while Apple itself could be interested.

"Imagination Technologies announces that over the last few weeks it has received interest from a number of parties for a potential acquisition of the whole group," the company said.

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"The board of Imagination has therefore decided to initiate a formal sale process for the group and is engaged in preliminary discussions with potential bidders."

Imagination has said it doubted Apple, which accounts for about half of its sales, could go it alone without violating Imagination's patents. Analysts said legal battles were likely and Imagination started a dispute resolution procedure in May with the U.S. giant, which is valued at $761 billion.

The British company initially responded to Apple's decision to walk away by putting two of its main divisions up for sale.

"That was a pretty dire scenario, akin to selling off the family silver to keep the estate going a little longer," said Neil Wilson, Senior Market Analyst, ETX Capital. "Now the shutters are up and a buyer sought. A pretty ignominious end to what was a great British tech success story."

APPLE RELIANCE

Imagination has licensed its processing designs to Apple from the time of the first iPod and receives a small royalty on every device using its graphics.

Imagination's shares rose sharply between 2009 and 2012 as sales of smartphones boomed, prompting Apple and Intel to buy stakes and the company was valued at more than 2 billion pounds in April 2012. Apple owns 8 percent of the shares.

Imagination struggled, however, to reduce its reliance on Apple, and has faced increased competition from the likes of chipmaker Qualcomm and British rival ARM, which developed its own graphics to complement its core processor blueprints.

Imagination downplayed fears it could lose Apple contract for years. Facing reports that Apple was building a graphics operation and hiring Imagination staff, the British firm told investors that Apple was just improving its customization of the technology Imagination sold, rather than replacing it.

Analysts at Stifel said they thought interested parties could include those groups that want to develop their own processing technology across platforms such as mobile, wearable tech, vehicles and the so-called Internet of Things.

"This could include a coordinated Chinese bid, a hyper-scale vendor from the cloud or some other IP player," they said.

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Imagination said on Thursday it had received indicative proposals for its embedded MIPS technology - processors used in vehicles and home appliances - and its mobile connectivity division Ensigma, the two businesses put up for sale in the wake of the slide in its shares.

While Imagination has other clients for its technology, UBS analysts estimated in April that its non-Apple business was worth just 81 million pounds and the MIPS division, which it bought for $100 million in 2013, was worth 77 million pounds.

UBS said the company could be worth 110 pence per share on a sum of the parts basis. In May, Jefferies said the wind up value was about 96 pence a share while Morgan Stanley said the company could be worth as little as 106 million pounds, or just 30 pence per share, though its base case was 95 pence.

The U.S. investment bank said Imagination's headquarters was worth 40 million pounds.

(Additional reporting by Tom Bergin and Tenzin Pema; editing by David Clarke)