BL: Garmin Plans to Offer EU2.3 Billion for Tele Atlas (Update3)
By Marcel van de Hoef
Oct. 31 (Bloomberg) -- Garmin Ltd., the biggest U.S. maker of car navigation devices, will make a hostile 2.3 billion-euro ($3.3 billion) cash offer for Tele Atlas NV, trumping a bid by TomTom NV for the digital-mapping company.
Garmin will offer 24.50 euros for each Tele Atlas share, the George Town, Grand Cayman-based company said in a PR Newswire statement today. The bid is 15 percent more than Amsterdam-based TomTom's 21.25 euro proposal on July 23. Tele Atlas shares jumped as much as 17 percent to 28.05 euros in Amsterdam.
The battle for Tele Atlas, the world's second-largest maker of digital maps, comes as Garmin and TomTom vie for dominance in the $6.5 billion navigation market. Garmin and TomTom expect to ship a combined 20 million units this year as drivers snap up devices to help them find their way and avoid traffic.
``A bidding war has started,'' said Jesper Kruger, who helps manage about $64 billion at ATP in Copenhagen. ``TomTom needs this asset, so they will have to increase their offer by at least 20 percent.''
TomTom, the world's largest maker of car navigation devices, agreed in July to buy Tele Atlas for about 2 billion euros. Tele Atlas shares have traded higher than that bid since Oct. 1.
TomTom shares plunged as much as 16 percent to 56.98 euros, the biggest drop in two years. They traded at 57 euros as of 12:09 p.m. in Amsterdam.
Redrawing the Map
Den Bosch, Netherlands-based Tele Atlas trails Navteq Corp. in the market for maps used in car-navigation systems. Espoo, Finland-based Nokia Oyj, the world's biggest maker of mobile phones, agreed to buy Navteq for $8.1 billion this month.
``TomTom will have to bid 26 euros or more for the shares of Tele Atlas. It is of great strategic importance to TomTom as Nokia bought Navteq,'' said Frits de Vries, an analyst at Rabo Securities in Amsterdam who rates Tele Atlas shares ``hold.'' ``Both companies are in solid financial condition, although Garmin is bigger. This could be a long takeover battle.''
TomTom forecasts industry shipments will more than double this year from 2006.
Garmin plans to start the bid before Dec. 4, when TomTom's offer expires. Garmin said it has ``sufficient'' financing commitments and more than $1 billion of available.
``Given the high growth and rapid change the navigation market has undergone to date, we feel that now is the right time for Garmin to move ahead with this proposed combination with Tele Atlas,'' Garmin Chief Executive Officer Min Kao said in the statement. Garmin plans to make Tele Atlas maps available ``to the entire navigation market on a non-discriminatory basis.''
Raised Forecasts
The U.S. company also reported earnings that beat analysts' estimates today and raised its annual sales and profit forecasts.
Third-quarter net income grew 57 percent to $193.1 million, or 88 cents a share, from $123 million, or 56 cents, a year earlier, Garmin said in a separate statement. The average of 13 analyst estimates compiled by Bloomberg was for earnings of 82 cents. Revenue increased 79 percent to $729 million.
Garmin said full-year sales will top $2.9 billion and earnings will exceed $3.40 a share. The company on Aug. 1 said that 2007 revenue would exceed $2.8 billion and earnings would be more than $3.15 a share.
Tele Atlas said it received a letter from Garmin today expressing its intention to make a bid. The company said it will review the terms and conditions of the offer.
TomTom is studying ``what's going on,'' spokesman Taco Titulaer said. He declined to say whether TomTom will raise its bid or to comment further.
Market Share
The worldwide market for portable navigation devices will be worth as much as 4.49 billion euros this year, based on shipment prices from the manufacturers, the median estimate of three analysts surveyed by Bloomberg News via telephone and e-mail.
TomTom forecasts the North American market for personal navigation devices will increase to between 8 million and 9 million units this year from 3 million in 2006. In Europe, the market will almost double in volume to between 15 million and 16 million units from 8.5 million, TomTom estimates.
TomTom has just under 50 percent of the European market for portable navigation devices, and more than 20 percent of the North American market. Garmin said today its North American market share is about 50 percent, and that its European market share ``continues to improve.''
Garmin's and TomTom's portable devices for cars and other vehicles have a touch-screen display and use the global positioning system, or GPS, a satellite navigation system for determining one's precise location on the planet.
To contact the reporter on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net
Last Updated: October 31, 2007 07:15 EDT
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