The takeover battle for TeleAtlas, a provider of map data for navigation systems, heated up a few degrees on Nov. 7 as GPS device maker TomTom raised its bid and disclosed it had already acquired more than 28% of TeleAtlas' stock.
TomTom's offer, which values TeleAtlas at nearly $4.3 billion, vaults past a surprise bid by rival navigation device maker Garmin (GRMN) announced Oct. 31 (BusinessWeek.com, 11/02/07) that valued TeleAtlas at $3.3 billion.
TeleAtlas gave TomTom five days to respond to Garmin's brinkmanship, and respond it has. The latest offer amounts to a 22% improvement over Garmin's, not to mention an 81% premium above where TeleAtlas' shares stood on July 20, the day before TomTom's initial buyout offer.
Garmin's bid of €24.50 per share had topped a July offer of €21.25 by TomTom that valued TeleAtlas at $2.8 billion. Now TomTom says it will pay €30, or nearly $44, for each TeleAtlas share it hasn't already acquired. Goldman Sachs International (GS), ABN Amro, and Rabobank have agreed to finance up to €2.2 billion, or $3.2 billion, of the new TomTom bid.
Hampered by Dutch Regulations
TomTom's latest move appeared to deal a serious blow to Garmin's hopes of acquiring TeleAtlas. TomTom's 28% stake, most of which was acquired from International Asset Management, a European hedge fund, makes it TeleAtlas' largest single shareholder. Though not a majority interest, TomTom's holdings would make it easier to assemble enough votes to reject a counterbid by Garmin.
Published reports suggested TomTom was continuing to accumulate TeleAtlas shares. But a source familiar with the matter tells BusinessWeek that TomTom doesn't anticipate buying much more because of certain Dutch regulations that take effect in the event its stake reaches 30%. Both TomTom and TeleAtlas are based in the Netherlands.
A spokesman for Kansas company Garmin said there was no immediate comment on TomTom's maneuver. One wild card: it remains unclear how many TeleAtlas shares Garmin has already accumulated, or whether it has already forged alliances with other sizable TeleAtlas stockholders.
Venture Capital Bedfellows
Garmin disclosed on Oct. 31 it had acquired more than 5% of TeleAtlas' stock on the open market. The exact amount of its equity stake is unknown; under Dutch regulatory law it is not required to disclose its holdings again until they reach 10%. Its bid is being financed by Credit Suisse and Wachovia (WB), and it is being advised by KPMG and Ernst & Young.
TeleAtlas' other major shareholders include four Silicon Valley venture capital funds. Oak Investment Partners and Net Enterprise Associates hold about 19% of TeleAtlas' shares between them, while Meritech Capital and TeleSoft Partners control a combined 10% stake. Fidelity (FMR) controls 9% through various mutual funds, while German auto parts supplier Robert Bosch owns 7%.
However things go, Garmin now finds itself in a difficult fix. If it raises its bid and tries to round up more shares, it runs the risk of further depressing its stock price, diluting the value of the currency it hopes to use to pay for some of the purchase. Also, a richer Garmin bid for TeleAtlas would mean paying the higher price for all the shares now held by TomTom, enriching its one major rival, one it has battled with repeatedly over patents in U.S. and European courts.
Perception Worse Than Reality
The situation has already put a serious dent in Garmin's stock, which slid more than 10% after the new TomTom bid was announced. After closing at an all-time high of $120.48 on Oct. 30, the stock has now lost about a quarter of its value in little more than a week—a drop of nearly $7 billion in market capitalization.
If Garmin loses out in the bidding, it faces the prospect of relying on mapping data from vendors controlled by rivals. Garmin currently buys nearly all of its mapping data from Navteq (NVT), so it doesn't rely very heavily on TeleAtlas. But Navteq is in the process of being acquired by Nokia (NOK) for more than $8 billion as part of the Finnish company's effort to add navigation features to its cell phones.
Still, losing the bidding war over TeleAtlas may not necessarily spell disaster for Garmin, says analyst Richard Valera at Needham & Co. in New York. "Nokia will probably run Navteq in a standalone fashion, and that means Garmin will still be able to get its data there," Valera says. "The perception of having lost out to TomTom will be horrible, but the reality probably won't be."