Nov. 7 (Bloomberg) -- TomTom NV, the world's largest maker of car navigation equipment, raised its bid for digital-mapping company Tele Atlas NV by 41 percent to 2.9 billion euros ($4.2 billion), topping a rival offer from Garmin Ltd.

TomTom will pay 30 euros a share, beginning with the immediate purchase of 28 percent of Tele Atlas from institutional investors, the company said in an e-mailed statement today. Garmin offered 24.50 euros last week after TomTom bid 21.25 euros July 23. Tele Atlas stock rose as high as 32.80 euros today.

Global sales of navigation devices will rise 20 percent to $10 billion this year, according to industry researcher Canalys. Amsterdam-based TomTom and Garmin, the industry's dominant manufacturers, are competing for the 20 million kilometers (12 million miles) of roads mapped in 200 countries by Den Bosch, Netherlands-based Tele Atlas. The company, the world's second- biggest producer of maps, lost money for the past 10 years.

``This is meant to be a knockout bid,'' said Michiel Plakman, a fund manager at Rotterdam, Netherlands-based Robeco, which oversees about $8.8 billion, including TomTom and Tele Atlas. ``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.''

TomTom's Chief Executive Officer Harold Goddijn spoke with Tele Atlas CEO Alain De Taeye earlier today, Goddijn said in a phone interview. De Taeye is pleased by the raised offer and there's ``no reason to assume'' Tele Atlas will withdraw its support for TomTom's bid, Goddijn said.

Up and Down

Tele Atlas said it will review the new bid and ``inform the market on further steps as soon as reasonably possible.'' Garmin is reviewing the offer and ``possible responses,'' spokesman Ted Gartner said over the phone. He declined to elaborate.

TomTom shares fell 1.53 euros, or 2.7 percent, to 55.01 euros in Amsterdam. The stock earlier slumped as much as 9.7 percent, rebounded to a gain of 4.5 percent, and then dropped again. Tele Atlas shares jumped 5.11 euros, or 19 percent, to 32.06 euros. Garmin shares lost $11.22, or 11 percent, to $89.34 at 4 p.m. New York time in Nasdaq Stock Market trading.

Tele Atlas will help TomTom expand into ``areas where we're not active at the moment, such as mobile telephones and Internet,'' Goddijn said in the interview.

TomTom has said it controlled 51 percent of the European market for portable navigation devices at the end of the third quarter, and 27 percent of the North American market. Garmin said last week its North American market share is about 50 percent, and that its European market share ``continues to improve.''

Share Purchases

TomTom will today buy about 25.8 million Tele Atlas shares, or 28.3 percent, from institutional investors at 30 euros each, spokesman Taco Titulaer said by phone. He declined to elaborate. It will purchase 15.8 million shares from International Asset Management BV, according to the statement.

An offer document will be published later this month and the transaction will be completed by the end of this year.

Nokia Oyj, the world's biggest maker of mobile phones, agreed to buy Navteq Corp. for $8.1 billion last month, adding digital map content to its mobile phones.

TomTom's offer values Tele Atlas at 11 times last year's sales, while Nokia agreed to pay about 14 times revenue for Navteq. The average technology stock in Morgan Stanley Capital International's World Index sells for about three times sales.

``This price is a little insane, but it's being paid,'' said Maurits Heldring, head of Dutch equity research at Kepler Landsbanki in Amsterdam. He has a ``hold'' rating on TomTom shares and ``reduce'' on Tele Atlas.

Garmin's Stake

Garmin, based in George Town, Grand Cayman, said on Oct. 31 it would offer 24.50 euros for each Tele Atlas share, 15 percent more than TomTom's original 21.25 euro proposal of July 23. Tele Atlas shares traded higher than Garmin's bid after it was announced, suggesting investors were betting on a higher offer.

The U.S. company already owns more than 5 percent of Tele Atlas's shares, according to an Oct. 30 filing with the Dutch financial-markets regulator AFM.

TomTom and Garmin have forecast they will ship a combined 20 million devices this year as they add traffic data and services.

TomTom has said it wants to use feedback from its more than 12 million users to constantly update Tele Atlas maps with road changes. Garmin has ``very much the same capabilities although a bigger universe,'' company spokesman Jon Cassat said on a conference call with reporters on Oct. 31.

Garmin said it plans to make Tele Atlas maps available ``to the entire navigation market on a non-discriminatory basis.'' TomTom plans to do the same.

`Better' Maps

TomTom said it will start selling ``noticeably better'' maps within 12 months after completing the acquisition. The takeover will add to earnings per share at the end of the second year after completion, Goddijn said.

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.

Navteq is the world's biggest maker of digital maps used in car navigation systems.

To contact the reporter on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net

Last Updated: November 7, 2007 16:16 EST