Dutch navigation systems company TomTom plans to buy its main map supplier, Tele Atlas, for 1.8 billion euros ($2.5 billion), hoping tight integration of maps and products will give it an edge over competitors. The offer is supported by Tele Atlas and represents a 32 percent premium over the Tele Atlas average share price in the last three months, the companies said. Tele Atlas had generated around 40 percent of revenue from TomTom in the second quarter.
The companies said they could effectively turn TomTom's installed base of more than 10 million navigation devices into automated map surveyors, which would improve maps and allow new features such as daily map updates and intelligent routing. Tele Atlas will act as an independent business unit and continue to supply other manufacturers with digital maps and related data, the companies said.
Notablecalls: The news will likely have positive effect of NavTeq's (NYSE:NVT) stock price. Despite the initial turmoil, NVT has managed to rally nicely following my Actionable call alert on June 25 (see archives). I'm hearing UBS is upping their rating to Buy from Hold this morning, which should put some additional fire under the stock.
I think TomTom's aqcuisition of Tele Atlas shows that the navigation device makers have realized that the co's that control the mapping business will control the whole PND business. NavTeq is the largest provider of maps and I think today's news will put it in play.
Likely suitors include Microsoft, Google, Nokia among others.
Considering NVT's recent run, I would not be surprised to see the stock pull back after the strong open. But overall, it looks like upside from here for NVT.