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July 23, 2007
TomTom Bids for Tele Atlas
Forbes.com
TomTom NV, Europe's largest maker of car navigation systems, said Monday it would buy digital mapping company Tele Atlas NV for about euro2 billion (US$2.8 billion) to form a bulwark against larger competitors and help it map the best possible routes in real time.
TomTom said it would pay euro21.25 (US$29.33) per share for Den Bosch, Netherlands-based Tele Atlas, a 28 percent premium to that company's closing price on Friday.
The deal would combine Europe's two smaller, high-growth rivals against the dominant players in the navigation device and mapping markets: Cayman Islands-based Garmin Ltd. (nasdaq: GRMN - news - people ), which has operational headquarters in Kansas, and Chicago-based Navteq (nyse: NVT - news - people ) Corp.
Crucially, Tele Atlas will now be able to draw on information gathered from millions of TomTom users' navigation systems to improve its maps. By locking up Tele Atlas, TomTom will reduce a long-term threat to its margins from competing navigation systems: Even if they can be built more cheaply elsewhere, they will have to go through TomTom - or Navteq - to get their mapping information.
The companies said they expected no opposition from regulators, though Tele Atlas shareholders must approve the management-endorsed deal. The companies didn't set a date for TomTom to make its offer formal or when they expect the deal to close.
Tele Atlas shares leapt 31 percent to euro21.69 (US$29.94) on hopes TomTom might even sweeten the deal to gain shareholder approval, while TomTom shares closed 11 percent higher at euro45.50 (US$62.80).
Amsterdam-based TomTom relies on the data that Tele Atlas gathers in order to present the maps for its displays. Tele Atlas has been increasing sales quickly but was unprofitable until recently, and relies on TomTom for around a third of its revenue.
Both Tele Atlas and Navteq used to operate by sending out vans to map the roads of the world, using Global Positioning System satellites to report their locations and build up a database. But both are increasingly using feedback from customers to update their maps.
"The whole world is a little surprised about this announcement, and that's only logical because it's a bold move in terms of competitiveness," Tele Atlas CEO Alain de Taeye said on a conference call.
"But I think everybody that's a professional in this business really understands the strength of taking ... community feedback from (TomTom's) 10 million customer base, which basically is largest base of mapping surveyors available in the market ... and combining that with the maps which we already have," he said.
He said he didn't expect to lose customers as a result of the deal, but didn't rule out "collateral damage" from some TomTom competitors.
Tele Atlas has deals with TomTom, Qualcomm Inc. (nasdaq: QCOM - news - people ) and Nokia Corp. (nyse: NOK - news - people ), among others, while Garmin, Google Inc. (nasdaq: GOOG - news - people ), Yahoo Inc. (nasdaq: YHOO - news - people ) and AOL's MapQuest mostly use Navteq. But the largest players take at least some information from both, and analysts say they have an interest in ensuring neither Navteq nor Tele Atlas becomes too dominant at geo-mapping information.
TomTom Chief Executive Harold Goddijn said the combined company would be willing to "supply all companies wanting to rely on the improved maps for their personal navigation devices, wireless handsets, in-car systems, Internet services and in-house routing services."
SNS Securities analyst Martijn den Drijver told Dow Jones Newswires he believes TomTom's offer was low, and recommended that investors buy Tele Atlas shares and reduce holdings in TomTom.
Sal. Oppenheim analyst Nicolas Stackelberg said the offer price was "fair" but wouldn't rule out another offer.
TomTom will have to pay out about euro2 billion (US$2.8 billion) to Tele Atlas shareholders, but will then get back the euro200 million (US$300 million) in cash the debt-free company has on its books.
Separately, TomTom reported a first-quarter net profit of euro68 million (US$94 million), up 81 percent from euro38 million a year earlier, as sales rose 37 percent to euro380 million (US$524 million) from euro277 million. The company credited strong demand for its products.
TomTom estimated its market share in Europe is just under 50 percent, and around 20 percent in the United States.
It raised its estimates for second-half device sales to at least 8 million units from at least 7 million, and said operating margins would be at least 20 percent of sales, instead of "around" that level.
TomTom Bids for Tele Atlas
Forbes.com
TomTom NV, Europe's largest maker of car navigation systems, said Monday it would buy digital mapping company Tele Atlas NV for about euro2 billion (US$2.8 billion) to form a bulwark against larger competitors and help it map the best possible routes in real time.
TomTom said it would pay euro21.25 (US$29.33) per share for Den Bosch, Netherlands-based Tele Atlas, a 28 percent premium to that company's closing price on Friday.
The deal would combine Europe's two smaller, high-growth rivals against the dominant players in the navigation device and mapping markets: Cayman Islands-based Garmin Ltd. (nasdaq: GRMN - news - people ), which has operational headquarters in Kansas, and Chicago-based Navteq (nyse: NVT - news - people ) Corp.
Crucially, Tele Atlas will now be able to draw on information gathered from millions of TomTom users' navigation systems to improve its maps. By locking up Tele Atlas, TomTom will reduce a long-term threat to its margins from competing navigation systems: Even if they can be built more cheaply elsewhere, they will have to go through TomTom - or Navteq - to get their mapping information.
The companies said they expected no opposition from regulators, though Tele Atlas shareholders must approve the management-endorsed deal. The companies didn't set a date for TomTom to make its offer formal or when they expect the deal to close.
Tele Atlas shares leapt 31 percent to euro21.69 (US$29.94) on hopes TomTom might even sweeten the deal to gain shareholder approval, while TomTom shares closed 11 percent higher at euro45.50 (US$62.80).
Amsterdam-based TomTom relies on the data that Tele Atlas gathers in order to present the maps for its displays. Tele Atlas has been increasing sales quickly but was unprofitable until recently, and relies on TomTom for around a third of its revenue.
Both Tele Atlas and Navteq used to operate by sending out vans to map the roads of the world, using Global Positioning System satellites to report their locations and build up a database. But both are increasingly using feedback from customers to update their maps.
"The whole world is a little surprised about this announcement, and that's only logical because it's a bold move in terms of competitiveness," Tele Atlas CEO Alain de Taeye said on a conference call.
"But I think everybody that's a professional in this business really understands the strength of taking ... community feedback from (TomTom's) 10 million customer base, which basically is largest base of mapping surveyors available in the market ... and combining that with the maps which we already have," he said.
He said he didn't expect to lose customers as a result of the deal, but didn't rule out "collateral damage" from some TomTom competitors.
Tele Atlas has deals with TomTom, Qualcomm Inc. (nasdaq: QCOM - news - people ) and Nokia Corp. (nyse: NOK - news - people ), among others, while Garmin, Google Inc. (nasdaq: GOOG - news - people ), Yahoo Inc. (nasdaq: YHOO - news - people ) and AOL's MapQuest mostly use Navteq. But the largest players take at least some information from both, and analysts say they have an interest in ensuring neither Navteq nor Tele Atlas becomes too dominant at geo-mapping information.
TomTom Chief Executive Harold Goddijn said the combined company would be willing to "supply all companies wanting to rely on the improved maps for their personal navigation devices, wireless handsets, in-car systems, Internet services and in-house routing services."
SNS Securities analyst Martijn den Drijver told Dow Jones Newswires he believes TomTom's offer was low, and recommended that investors buy Tele Atlas shares and reduce holdings in TomTom.
Sal. Oppenheim analyst Nicolas Stackelberg said the offer price was "fair" but wouldn't rule out another offer.
TomTom will have to pay out about euro2 billion (US$2.8 billion) to Tele Atlas shareholders, but will then get back the euro200 million (US$300 million) in cash the debt-free company has on its books.
Separately, TomTom reported a first-quarter net profit of euro68 million (US$94 million), up 81 percent from euro38 million a year earlier, as sales rose 37 percent to euro380 million (US$524 million) from euro277 million. The company credited strong demand for its products.
TomTom estimated its market share in Europe is just under 50 percent, and around 20 percent in the United States.
It raised its estimates for second-half device sales to at least 8 million units from at least 7 million, and said operating margins would be at least 20 percent of sales, instead of "around" that level.
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