November 05, 2007
Garmin Makes a Bid for TeleAtlas
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Susan Smith, Managing Editor
Garmin Makes a Bid for TeleAtlas
by Susan Smith
Consolidation is the name of the game in the digital map/in-car or handheld device market. According to the press release, Garmin Ltd. announced last week its intent to make a
cash offer for all the outstanding shares of TeleAtlas N.V. on a fully diluted basis at an indicative offer price of euro 24.50 in cash per share, implying an equity value for the Company of euro 2.3 billion, which is 15 percent higher than the offer for TeleAtlas made by TomTom in July. Garmin plans to launch the bid before December 4, which is when TomTom’s offer expires.
In a separate announcement, Garmin announced a
record third quarter ending September 29, 2007 with total revenue of $729 million, up 79% from $408 million in third quarter 2006.
TomTom offered to acquire TeleAtlas for euro 2 billion or euro 21.25 a share, in order to own accurate navigational mapping data. In what was to become perhaps a knee-jerk reaction, or was possibly already in the works, in October, Nokia made an offer to pay $78 in cash for each share of NAVTEQ including outstanding options for an aggregate purchase price of approximately $8.1 billion (euro 5.7 billion), or approximately $7.7 billion (euro 5.4 billion) net of NAVTEQ existing cash balance. Nokia is the provider of mobile devices, and with the addition of NAVTEQ, Nokia will be able to offer advanced mapping data on those devices as well as “innovative, context aware Internet
TomTom is the world’s largest maker of car navigation devices, and Tele Atlas is NAVTEQ’s main mapmaking competitor. The race was on to be able to own maps provided with in-car and handheld navigation devices.
Garmin Chief Executive Min Kao pointed out that 90 days ago the industry was quite different than it is today with two independent suppliers (of digital maps). “Given that changes are taking place, we feel it’s the right time for us to exercise leadership, in terms of vertically integrating but also being able to define the maps of the future and lead the way in terms of device innovation which we think will be good for the entire industry.”
What is interesting about Garmin’s offer is that they have historically done more business with NAVTEQ than TeleAtlas. After TomTom and Nokia announced plans to integrate the purchased maps with their navigation devices, Garmin’s shares tumbled, in spite of TomTom and Nokia’s claims that they would sell mapping data to anyone who wanted it after the acquisitions had gone through. Many speculators have suggested that because TomTom’s offer was so low, other companies might make a higher bid for TeleAtlas, which is exactly what has happened. It is also suggested that TomTom may come back with a counteroffer.
Garmin feels well positioned to acquire TeleAtlas, with $1 billion in cash as well as secured financing commitments sufficient for the intended Offer through loans financed through Credit Suisse and Machovia.
In response to an investor question about winding down from the use of NAVTEQ map products at Garmin, Cliff Pemble, president and CEO of Garmin commented, “I think we’ve been saying all along we have longer term contracts with NAVTEQ and that’s definitely true. We haven’t had much discussion in terms of what things look like beyond the expiration of those contracts.” From a technical and operational point of view, Pemble added, “We’ve been very adept at using maps from various suppliers so it’s not a difficult thing to switch. The timing is yet to be determined, although we would anticipate that over the next 12-24 months we would start to
transition some products and some markets depending upon the situation.”
There was a question about the cultural changes that might be in store for Garmin, as a result of acquiring TeleAtlas. “We’ve worked with TeleAtlas over the years and worked with them initially on some of our early PND products,” said Pemble. “We think the team is very much culturally aligned with us as an entrepreneurial organization, very aggressive. Our goal is to be able engage as a customer with TeleAtlas and retain all the customers of TeleAtlas going forward.”
Maps are obviously the key ingredient that makes devices work and is a unique asset that requires a lot of effort to create, which is a primary reason Garmin didn’t choose to create its own maps. “It is an exceedingly difficult task to build the maps from scratch – technically possible – but it’s a proposition that has high risk from an execution point of view and very long time schedule, and it is not inexpensive,” said Pemble.
“This acquisition does allow us to participate more broadly in the automotive OEM space as well as in the wireless space as device as well as content providers,” Pemble concluded. “I think inevitably there will be some shift in the market as in-Dash becomes more affordable and handsets become more location enabled and able to run navigation applications. We’re well prepared on all those fronts by offering devices that address the OEM market as well as wireless market and acquiring TeleAtlas will allow us to participate as a content provider in those areas.”
Top News of the Week
NCI, Inc., a provider of information technology services and solutions to U.S. federal government agencies, announced today that it has been awarded two technology demonstration task orders from the
United States Strategic Command
(USSTRATCOM) to develop cutting-edge search and geospatial visualization capability for key federal customers. The competitive task orders were awarded to NCI, together with Google Inc. and Next Tier Concepts, Inc. under the NETCENTS contract.
China TransInfo Technology Corp., ("China TransInfo" or "the Company"), a Geographic Information System ("GIS") technology provider for the People's Republic of China ("PRC") government's Transportation, Land & Resource and Digital City segments, today announced it has entered into a solution partnership with Oracle Corporation ("Oracle"), the world's largest enterprise software company, for work within China's transportation sector.
Discovery News Web site highlighting his use of DigitalGlobe's satellite imagery in his work.
Intermap Technologies Corp. today announced the strategic expansion of their automotive team through the hiring of three seasoned automotive industry experts in the U.S. and Germany. As advance driver assisted system (ADAS) initiatives gain traction worldwide, the Company is committed to supplying the most accurate and uniform geometric data to enable auto safety devices, fuel performance applications, and other advanced technologies.
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