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From Staff Reports
TomTom NV, Europe's largest maker of navigation devices used in automobiles, has boosted its bid for digital-mapping company Tele Atlas NV (TLATF) by 41% to $4.2 billion, leapfrogging a competing $3.31 billion offer from Garmin Ltd. (GRMN), and significantly upping the ante in the bidding battle for the last independent computerized-cartography company.
TomTom will pay about $44 a share (30 euros) for Tele Atlas – starting with a 28% stake it will acquire from institutional investors, TomTom said in a statement yesterday (Thursday). Garmin had offered about $36.96 (24.50 euros) a share last week after TomTom bid $31.20 (21.25 euros) on July 23. Garmin also took a 5.02% stake in the Dutch mapmaker – a move intended to give it the tactical high ground, should bidding escalate.
And it likely will, according to a fund manager who holds shares of both TomTom and Tele Atlas.
"This is meant to be a knockout bid," Michiel Plakman, who oversees about $8.8 billion for Robeco in The Netherlands, told Bloomberg News. "The share price suggests people see a chance for Garmin to top this bid. I also believe they will, simply because they can, given their market cap and cash position."
Garmin, based in George Town, the Cayman Islands, and the Amsterdam-based TomTom are the two dominant players in the market for navigation devices, which include the satellite-directed global-positioning systems (GPS) motorists are using at an increasing rate. TomTom is the largest maker of automotive navigation devices, while Garmin is larger in the U.S. market, and overall.
Sales of handheld GPS devices also are soaring, as hobbyists, hikers, sportsmen and hunters flock to the market.
But the digital maps that put user-friendly face on the technology are key. And that pits Garmin against TomTom for the 12 million miles of roadways in 200 countries mapped by Tele Atlas, based in Den Bosch, The Netherlands. Tele Atlas, the world's Number Two producer of digital maps, has been losing money for a decade.
But the events of last month increased the company's value, many times over.
On Oct. 1, cell-phone giant Nokia Corp. (NOK) stunned the market – and Garmin investors – by announcing plans to buy the Chicago-based Navteq Corp. (NVT), a leading digital mapmaker, for about $8.1 billion.
Navteq is the key supplier of the digital maps Garmin's technology hides behind.
The proposed deal at $78 a share would be Finland-based Nokia's biggest purchase, and followed Nokia's acquisition of mobile-advertiser Enpocket. Initially, analysts viewed the Navteq purchase as a shot-across-the bow of Apple Inc., (AAPL), whose new and much-hyped iPhone comes equipped with mapping and navigation provided by Google Inc. (GOOG). But it also put an immense amount of pressure on Garmin, whose shares were pounded by investors who believed the Nokia-Navteq marriage would hamstring the fast-growing GPS maker. Investors were exceptionally disappointed that Garmin didn't strike first, and didn't even try to turn the bidding for Navteq into a two-horse race.
Navteq provides digital map information for automobile navigation systems, mobile phones and devices and Web sites. Navteq also owns Traffic.com, an interactive Web site that gives users up-to-the-minute traffic information in their area. Navteq generated revenue of $582 million last year, Nokia said.
"Location-based services are one of the cornerstones of Nokia's Internet services strategy. The acquisition of NAVTEQ is another step toward Nokia becoming a leading player in this space," Olli-Pekka Kallasvuo, Nokia's president and chief executive, said when the deal was announced.
"By joining forces with Navteq, we will be able to bring context and geographical information to a number of our Internet services with accelerated time to market. We also look forward to maintaining and enhancing the services and support provided to Navteq's existing and future customers."
The deal won't be completed until next year. But the agreement was enough to spook Garmin shareholders: Within days of the announced Nokia-Navteq tie-up, Garmin's shares – which had reached a new high of $122.78 – had plunged by more than $26 each, and were trading at less than $97.
The shares subsequently rebounded and raced to new highs, reaching a record at $125.68.
Garmin's shares have been pounded since the TomTom counter bid materialized, and have declined $40 each – or 32% – from that record peak. The shares skidded $3.67 each, or 4.11%, yesterday to close at $85.68.
Nokia has reassured investors that Navteq would continue to sell to Garmin, even after the buyout. Even so, Garmin went out hunting for a mapping firm of its own, and ultimately launched the counterstrike against TomTom for Tele Atlas.
In a telephone interview with Bloomberg yesterday, TomTom CEO Harold Goddijn said he spoke with Tele Atlas CEO Alain De Taeye. De Taeye was pleased by the boosted bid and said there was "no reason to assume" Tele Atlas will withdraw its support for TomTom's bid, Goddijn said.
In a statement, Tele Atlas said it would review TomTom's new bid and "inform the market on further steps as soon as reasonably possible."
As for Garmin? In a telephone interview, spokesman Ted Gartner told a reporter that the industry leader is reviewing the offer – as well as "possible responses," declining to elaborate further.
News and Related Story Links:
- Money Morning:
Garmin Takes 5% Stake in Tele Atlas, Company it is Pursuing in Hostile Bidding Battle
- Money Morning:
Garmin Beats Earnings Estimates, Launches $3.31 Billion Hostile Bid for Tele Atlas; Shares Plunge
Tele Atlas Endorses $4.2B TomTom Bid.