Europe's leading in-car navigation systems provider TomTom NVhas agreed to acquire digital map producer Tele Atlas NV for an enterprise value of EUR1.8 billion ($2.5 billion), the companies said Monday, July 23.
The Amsterdam-based buyer plans to offer Tele Atlas investors EUR21.25 per share, valuing the target's share capital at about EUR2 billion. Tele Atlas has about EUR200 million cash on its balance sheet.
The offer represents a 28% premium to Tele Atlas' closing price on Friday and has the backing of both boards.
The Dutch target supplies TomTom, also of the Netherlands, with digital road maps of U.S. and European countries to be used in tandem with in-car navigation systems it produces.
The companies said the merger will allow them to offer more accurate navigation information, improved coverage and new features, including daily map updates and intelligent routing to TomTom's 10 million navigation devices. Following the merger, Tele Atlas will continue to operate as a separate unit, developing and licensing digital map products for TomTom and other customers.
Tele Atlas shares were up EUR5.72, or over 35%, at EUR22.27 per share by late afternoon in Amsterdam, suggesting that investors are expecting a competing bid. The company is also listed in Frankfurt.
Shares in TomTom were up EUR4.08, or almost 10%, at EUR45.06.
Marcel Achterberg a Netherlands-based analyst at ING Group NV, thought TomTom was Tele Atlas' most suitable partner, though he didn't discount the possibility that a rival bidder would emerge.
"The deal makes sense for TomTom; it could [extract more] synergies than anyone else, and the deal would give it vertical integration and re-engergize growth as TomTom's [growth] is slowing," Achterberg said.
"There could still be competing bids for the company, ones from the software or teleco space or a company like Google[Inc.] or Yahoo! [Inc.]," Achterberg added. "But if Google had wanted to buy it, it probably already would have."
Amsterdam-based TomTom said it has already received irrevocable undertakings from International Asset Management BV and from Tele Atlas' board to tender shares representing about 17.4% of the target's share capital.
TomTom expects to publish an offer memorandum in October, and to complete the transaction by the end of 2007. The company is entitled to a EUR20 million breakup fee should the Tele Atlas board recommend a competing offer.
TomTom also released better-than-anticipated second-quarter earnings Monday. The company reported net profit of EUR68 million, up 81% from the same period a year ago, on revenue of EUR380 million, up 37% from last year.
Tele Atlas, which is based in the Dutch town of Den Bosch, had a net loss of EUR19 million in 2006, Ebitda of EUR42.8 million and revenue of EUR264.3 million.
The TomTom offer is 28 times Tele Atlas' projected 2007 Ebitda, the companies said.
Lehman Brothers Inc.is serving as financial adviser to Tele Atlas along with Atlas Advisors. Scott Simpson of Skadden, Arps, Slate, Meagher & Flom LLPand Houthoff Buruma NV are acting as legal counsel.
Goldman Sachs International, which is providing debt financing for the deal, is TomTom's financial adviser. Stibbe NV, Herbert Smith LLPand Willkie Farr & Gallagher LLP are providing legal counsel.
URL: http://www.TheDeal.com
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