TomTom strikes back: 30 euro/share

TomTom seems determined to give its rival Garmin a bloody nose in the race to takeover Tele Atlas. It has just been reported that TomTom has raised its bid to € 30 per share. Of course, the question still remains; will this completely knock out Garmin, but one thing is for sure: this is one very bold offer!

The complete takeover of Tele Atlas will cost TomTom about € 2.9 billion. If the takeover goes ahead, TomTom will pay the full amount in cash. To be able to finance the amount, TomTom has already made arrangements with Goldman Sachs, ABN Amro and Rabobank.

Shares

TomTom also announced that they will purchase about 25.8 million Tele Atlas shares today, which will give them 28.3% of the Tele Atlas shares. The majority of these shares will be transferred from International Asset Management, up to now Tele Atlas' largest shareholder.

First there was the increased bid, and now with this direct purchase of shares, TomTom succeeds in giving Garmin a double blow, since a share portfolio of this magnitude simply cannot be ignored. Garmin will think twice about taking over Tele Atlas, now their main competitor already holds about one third of the shares!

Intention

Just like last week, when Garmin announced their intention of paying € 24.5 for every Tele Atlas share, TomTom is following the same route and announcing the 'intention' of paying € 30 per share. We now wait for an official reaction from the Tele Atlas board. Should this reaction be positive, and we see no reason why it shouldn't be, TomTom will convert this intention into a substantive offer.

After this official announcement, the Tele Atlas shareholders will once again be offered the opportunity of selling their shares to TomTom. They are expected to be given from the end of November to the end of this year to make a decision. TomTom also needs to get the green light from the European Commission regarding the takeover. This 'go-ahead' is expected by the end of this year, but should this end up not being the case, then this period can be extended.

Reaction

As already stated, the wait is now for an official response from Tele Atlas. The board has already announced that it will favour a takeover by TomTom, should be Dutch PND manufacturer match the € 24.50 Garmin offer. TomTom did that and more: they topped the offer by no less than 25%.

Next week, there are special shareholders meeting planned at both Tele Atlas and TomTom's headquarters. On Tuesday 13th November, TomTom will explain the details of the new bid to its shareholders. It's also important to note that 57% of TomToms' shares are owned by the four founders of the company. They released a press released this morning, in which they stated to support the € 30/share bid.

On Wednesday 14th November, the Tele Atlas shareholders meet, and TomTom representatives will also be present. The Tele Atlas board is expected to marke a recommendation that their shareholders to sell their shares to TomTom. At the same time, a special vote will take place about the expected departure of five top directors of Tele Atlas the moment the takeover is completed. Also, new members for the (new) board will be elected. These elections are directly related to the takeover offer from TomTom. Should the current board support the Garmin offer instead, different persons will be elected.

Courses

The new TomTom offer has of course caused quite a stir on the Amsterdam stock exchange. At first, the TomTom shares dropped 8%, but after half an hour, it rose 6% again (to € 59.07), above yesterday's closing price. In the meantime, things have settled down again, and the TomTom share is currently at about 1.5% below yesterday's closing price.

Today, the Tele Atlas shares opened more than 20% above yesterday's closing price of € 32.50. About an hour after the stock exchange opened, the shares stabilised again at about € 31.50. That's still almost 17% higher than Tuesday's closing price.