Last week, Nokia announced that they had struck a deal with NAVTEQ to take over their company. The Finnish company will pay $78 per share, which means the total price for NAVTEQ will be $ 8.1 billion or ¤ 5.7 billion. It’s expected the takeover will be complete in the first quarter of 2008. NAVTEQ will continue to be an independent company, but will become part of the Nokia concern. After completion of the transaction, NAVTEQ’s current map data business will continue to be operationally independent, but organizationally a Nokia Group company. Judson Green, NAVTEQ’s CEO, will report directly to Olli-Pekka Kallasvuo, Nokia’s big boss.At this moment in time, Nokia still makes the lion’s share of their turnover and profit from the sales of mobile phones, but led by Kallasvuo, the company has also started to take on other markets.
Very attractive
NAVTEQ’s Chairman of the Board, Christopher Galvin, was very pleased with the price Nokia was willing to pay: “Nokia’s offer of $78 per share reflects a very attractive valuation for NAVTEQ's stockholders, representing a 34% premium to our stock price of one month ago. In considering the offer, we approached other potential purchasers about their possible interest in NAVTEQ and our Board took those contacts and discussions into account in determining that Nokia's proposal was the best opportunity available to maximize value for our stockholders."“Nokia's unique vision for location based services aligns perfectly with NAVTEQ’s vision to enable everyone to find their way to people, places and opportunities on mobile communications devices, cars, desktop computers and in all the other places that are important to them," said NAVTEQ President and CEO Judson Green. "It's really exciting to imagine what we can achieve by combining our location experience with the resources of a company that has a customer base of more than 900 million people.”
Nokia plans to finance the acquisition with a combination of cash and credit, and has secured a commitment on the debt. Nokia anticipates that the acquisition would not impact its share buy-backs under the current mandate, or its future cash distribution strategy in terms of dividends and share buy-backs which is subject to the shareholders’ approval. The acquisition is expected to reduce Nokia earnings in 2008 and 2009 on a reported basis.
Simpler
Taking over NAVTEQ will greatly simplify the development of new mobile services for Nokia. This not only means navigation via mobile phones, but also several software applications for eg. shopping, going out, emergency services or company advertisements.“Location based services are one of the cornerstones of Nokia’s Internet services strategy. The acquisition of NAVTEQ is another step toward Nokia becoming a leading player in this space” said Olli-Pekka Kallasvuo, President and CEO, Nokia. “By joining forces with NAVTEQ, we will be able to bring context and geographical information to a number of our Internet services with accelerated time to market."
The two companies already have a mutual partnership. NAVTEQ supplies the map material for Nokia’s navigational solutions. An example of this is Nokia Maps, the navigational software on Nokia’s N95.
Tele Atlas
A few months ago, it became public knowledge that NAVTEQ’s biggest competitor, Tele Atlas, will more than likely be taken over by TomTom. The two Dutch companies both support the takeover, and by now the official take over offer will have been published. Now that NAVTEQ has been bought by Nokia, there will be no independent supplier of digital map material left in the world .Mio
One of Tele Atlas’ big customers is Mio, which is part of MiTac international (just like Navman is). When the news became public that Tele Atlas was going to be bought by arch rival TomTom, Mio claimed they were now considering walking over to NAVTEQ, because there’s no getting around having to share confidential information with the supplier of digital maps, and of course Mio did not want to share this information with TomTom.Since the takeover of NAVTEQ presents them with a similar problem, Mio started negotiations with Tele Atlas and TomTom. They want warranties on the confidentiality of their information after Tele Atlas gets taken over by TomTom. Mio’s CEO Paul Notteboom says these negotiations are going as planned: “The negotiations are held at the utmost level and I expect all parties to reach an agreement. Nothing is guaranteed yet, but we have full confidence it will be eventually.”
Should all parties reach an agreement, this would be a substantial victory for TomTom, since this would mean they would be certain of the clientele of one of the larger customers of the former Tele Atlas.
Garmin
One party which probably isn’t too happy with the takeover of NAVTEQ by Nokia is the American company Garmin. TomTom’s biggest competitor in the market of mobile navigational systems uses mostly map material by NAVTEQ for it’s products, and this would mean they would become dependent on the Nokia group. This is a very uncomfortable position for Garmin to be in, since they and Nokia are direct competitors.So soon after the news was released that Nokia was going to take over NAVTEQ, speculations began to arise that Garmin would also make an offer to take over Tele Atlas. As already mentioned, TomTom is currently the main candidate for this, with an offer of ¤ 21.25 for every Tele Atlas share, which would mean a total takeover fee of ¤ 1.8 billion.
As long as the deal between Tele Atlas’ shareholders and TomTom isn’t finalised, it’s still possible that another party, like Garmin, would make a counter offer. Such an reaction would seem to be the only way Garmin could ensure itself of quality map material in the future, without becoming dependent on (one of ) their main competitors.
