TomTom to buy map supplier Tele Atlas
TomTom, which has sold more than 10 million navigation devices, said on Monday it intended to make a cash offer of 21.25 euros per share for fellow Dutch firm Tele Atlas, which also supplies online mapping Web sites Mapquest and Google Maps, as well as mobile phone maker Nokia.
The offer is supported by Tele Atlas and represents a 32 percent premium over the Tele Atlas average share price in the last three months, the companies said. It values the equity of Tele Atlas, which has a net cash position, at 2 billion euros.
TomTom, whose main competitor is Nasdaq-listed Garmin, sells car satellite navigation devices which perch on the dashboard, providing drivers with instructions to reach their destinations.
TomTom shares were up 7.4 percent at 44.02 euros at 0838 GMT, while Tele Atlas rose almost 27 percent to 20.96 euros.
The companies said the deal would improve maps and allow new features such as daily map updates and intelligent routing.
Tele Atlas will act as an independent business unit and continue to supply other manufacturers with digital maps and related data, the companies said.
Analysts ruled out a counterbid for Tele Atlas by its direct competitor, Navteq, because it would effectively create a monopoly for digital maps of the United States and Europe, but Sal. Oppenheim analyst Nicolas von Stackelberg said Microsoft could be interested.
LOSING CLIENTS?
Tele Atlas, which supplies other navigation system makers, could lose some of its clients, analysts said.
"I don't think that all the revenue from third parties will be lost, but particularly makers of personal navigation devices will have a problem to buy from a direct competitor," Von Stackelberg said.
Von Stackelberg said he estimated Tele Atlas had generated around 40 percent of revenue from TomTom in the second quarter.
Makers of built-in navigation systems as well as mobile phone manufacturers, however, could be attracted by the new features, Petercam analyst Eric de Graaf said in a note.
"We also believe that a price war between Navteq and Tele Atlas has become less likely, as the biggest prize, TomTom, can no longer be persuaded to move to Navteq," De Graaf said.
TomTom will fund the acquisition with debt and cash, and Chief Financial Officer Marina Wyatt said the acquisition would be accretive on a cash basis within 12 months of completion.
"I think it's great for TomTom," Fortis analyst Felix Oberdorfer said. "For Tele Atlas shareholders I think the offer seems on the low side compared to our calculated fair value of 26 euros."
TomTom, which also announced quarterly results early, sold 1.8 million portable navigation devices in the second quarter, above the average forecast of 1.69 million devices given in a Reuters poll of 10 analysts.
Sales, which rose 29 percent from the first quarter to 380 million euros, also beat the average forecast of 350 million. Net profit rose to 68 million euros from 44 million in the first quarter and compared with an average forecast of 50 million euros.
TomTom, which joined Amsterdam's blue-chip index last year, maintained its 2007 sales forecast of 1.6-1.8 billion euros and said it expects to sell between 8 to 9 million devices this year. Previously, it forecast shipments of 7 to 8 million units.
The average selling price, a closely watched measure of profitability, was 195 euros, down 4 percent from the previous quarter, but above an average expectation of 192 euros.
