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By William Patalon III
Garmin Ltd. (GRMN) yesterday (Thursday) said it is still reviewing its previously disclosed plans to make a cash offer to acquire digital mapmaker Tele Atlas NV (TLATF), which is also being pursued by Garmin's European rival, TomTom NV.
TomTom currently has the upper hand. It recently boosted its existing offer or Tele Atlas by 41% to $4.2 billion – and in the process leapfrogged a competing, unsolicited $3.31 billion offer from Garmin, upping the ante in a significant way for the last independent computerized-cartography company.
In related news yesterday, Garmin disclosed that it had settled all intellectual-property litigation with TomTom, which includes lawsuits in Texas, Wisconsin, The Netherlands and the United Kingdom. However, neither company disclosed details of the settlements in question. And they have another battle to settle – this one a battle for control of Tele Atlas, which is based in The Netherlands.
In an interview with The Associated Press, Garmin spokesperson Jessica Myers confirmed the company is still reviewing its potential bid, which was detailed on Oct. 31. She also confirmed that news of a patent-dispute settlement with TomTom is unrelated to its Tele Atlas plans.
Garmin is based in the Grand Cayman Islands, but has its operational headquarters in Olathe, Kan. It makes navigation products that utilize global-positioning-system (GPS) technology for automobiles, boats, aircraft, and for recreational uses such as camping and hiking. It's the U.S. market leader. TomTom, based in Amsterdam, is the European leader.
Garmin sued TomTom in U.S. District Court in both Texas and Wisconsin, claiming TomTom had infringed on Garmin patents. And Garmin asked courts in the Netherlands and United Kingdom to invalidate both lawsuits, the Seattle Post-Intelligencer reported.
A year ago, Garmin won the first round when a court in The Hague, Netherlands, refused TomTom's request for a preliminary injunction against Garmin for allegedly copying a European registered design it owned.
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 follow 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.
The deal won't be completed until next year. But the agreement was still 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 more than $40 each – about 33% – from that record peak.
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, which had already launched its initial $2.8 billion offer for Tele Atlas. Garmin upped the ante with the $3.31 billion bid, prompting TomTom to sweeten its offer to $4.2 billion, or $43.63 per share.
Shares of Garmin jumped earlier this week on speculation it might make a counter-offer of more than $60 a share for Tele Atlas. However, some securities analysts have concluded that Garmin faces an uphill battle, since TomTom already has amassed a 28% stake in Tele Atlas.
Garmin's shares closed yesterday at $84, down $1.60 a share, or 1.87%.
Here is a Timeline of Events involving Garmin, TomTom and Tele Atlas, according to the International Business Times:
- Garmin sues TomTom in federal courts in Texas and Wisconsin, claiming patent infringement.
- Garmin asks British and Dutch courts to invalidate TomTom's registered designs and patents.
- TomTom counter-sues in Wisconsin, alleging Garmin infringed on its patents bought from California-based Horizon Navigation Inc.
- TomTom requests preliminary injunction against Garmin for reportedly copying one of its designs. Result: Denied.
- TomTom bids $2.8 billion for Tele Atlas.
- Garmin bids $3.31 billion for Tele Atlas, and also takes a 5% stake in the target company.
- TomTom bids $4.2 billion for Tele Atlas, takes 28% stake in the target company.
- Companies settle patent disputes; Garmin weighs second counter-offer.
News and Related Story Links:
Money Morning News Analysis:
TomTom Bangs Out Higher Bid For Mapmaker Tele Atlas.
- Seattle Post-Intelligencer.com:
- International Business Times:
Garmin Vs. TomTom: A Timeline of Litigation Over Tele Atlas.
- Money Morning News Analysis:
Garmin Takes 5% Stake in Tele Atlas, Company it is Pursuing in Hostile Bidding Battle
- Money Morning News:
Garmin Beats Earnings Estimates, Launches $3.31 Billion Hostile Bid for Tele Atlas; Shares Plunge
Tele Atlas Endorses $4.2B TomTom Bid.
- CNNMoney.com: .
About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.