GPS device and software developer TomTom has increased its cash offer for digital mapmaker Tele Atlas to 2.9bn euros ($4.2bn), topping rival Garmin’s 2.3bn euro ($3.3bn) bid and 45% higher than the 2bn euros ($2.8bn) it agreed to pay in July.
Moreover, it hopes to inhibit Garmin’s willingness to come back with a yet higher offer by buying 28.3% of Tele Atlas stock from institutional investors to block any rival who wants to take over the company.
The latest offer pushed Tele Atlas stock up 18.66% to 31.98 euros ($46.55), above TomTom’s latest 30 euros-a-share ($43.66) offer, indicating that the bidding could go higher. By contrast, while Garmin mulled its latest move, its stock fell 7.71% to $92.81, on fears that it could bid too high or lose out.
The new bid, which lifts the value of Tele Atlas stock to a level 81% higher than when TomTom’s first offer was announced, may prove to be a decisive move in determining the whole landscape of the mobile internet, a market that is now poised for take-off.
The market was ignited by Nokia’s $8.1bn offer for digital mapping market leader Navteq early in October, which suggested that TomTom was getting Tele Atlas, the only other global player, on the cheap.
Netherlands-based Tele Atlas would only say it would review the terms and conditions of the new offer and inform the market as soon as possible.
Hans-Hendrik Puvogel, CEO of location-based experience mobile software and services vendor Jentro Technologies, said he had expected the higher TomTom bid, though he felt it could not go much higher. His Munich, Germany-based company competes with TomTom and Garmin, by supplying white-label personal navigation devices to their competitors. He said he felt the acquisition was essential for TomTom, which had fallen behind Garmin in the in the provision of on-line services.
The focus of location-based services is about to move from standalone PNDs to smart phones. Puvogel, whose company supplies Motorola, said that while the entire PND market is between 29 million and 30 million units, Nokia alone is likely to sell between 80 million and 90 million smart phones next year, many of them equipped with GPS.
The price Nokia was prepared to pay for Navteq finally convinced the market of how valuable the market for location-based devices is about to become. Sirf Technology, the biggest supplier of GPS chipsets, saw its stock soar to $30 when the Navteq deal was announced, even though it does not supply Nokia. The shares have since fallen by to $26.43 though its growth prospects were confirmed by a 43% rise in third-quarter revenue.
The mobile internet has got off to a disappointing start, largely because vendors were simply looking to replicate the desktop, which has supreme advantages for major e-commerce transactions. However, GPS and digital maps have opened up a world where users can use the internet to access information specific to their location and this in turn will generate enormous advertising revenue.