Under the terms of its July agreement to be acquired by TomTom, if Tele Atlas received a higher bid, TomTom has a right to match it within five working days.
If it fails to do this, ‘s-Hertogenbosch, Netherlands-based Tele Atlas said it intends to terminate the TomTom agreement and said it would meet with Garmin’s management.
To get some idea of how much higher the bidding might go, Nokia’s $8.1bn offer for Navteq values the company at 9.7 times its expected 2007 revenue of $815m to $825m. By contrast, Garmin’s bid values Tele Atlas at 7.2 times its expected 2007 revenue of 315m euros (%455.7m).
To pay the same multiple of revenue as Nokia is paying for Navteq, a successful bidder for Tele Atlas would have to come up with an offer of $4.5bn, a 36% increase on the current level.
A bidding war is anticipated for the company because while Garmin has offered 24.50 euros ($35.40) a share, they are currently trading at 27.96 euros ($40.45), valuing the company at 2.51bn euros ($3.63bn).
TomTom has retreated into silence while it considers whether to increase its 2bn euro ($2.8bn) offer. Given that Garmin has admitted that a Tele Atlas acquisition would be a drain on its earnings for the first two years, it would be an even greater burden to TomTom.
Moreover, even matching Garmin’s offer would not guarantee success, as the Cayman Islands-based company could simply bid higher, possibly adding some of its highly rated shares to the present cash offer.
In an age when computing is rapidly becoming mobile, digital mapping is the key to a host of technologies. Accordingly, Tele Atlas may well attract the interests of the giants of the industry, which would have no difficulty in coming up with an offer that neither Garmin nor TomTom could match.
