Garmin, the leading navigation device maker in the United States, said Wednesday it has made an unsolicited $3.3 billion bid for Dutch digital map provider Tele Atlas, setting the stage for a bidding war with Garmin's European rival TomTom.
The pending battle between the two rivals has been triggered by consolidation in the industry, which went into high gear in July when mobile-phone maker Nokia said it would pay $8.1 billion for Tele Atlas's only global rival, U.S.-based Navteq. The latter company this month agreed to the takeover.
Garmin's offer for Tele Atlas is 15% above TomTom's $2.6 billion bid in July, and a 48% premium over Tele Atlas's stock price as of July 20. Garmin notified Tele Atlas executives Wednesday that it plans to officially launch the offer Dec. 4, the scheduled expiration date of TomTom's bid.
Garmin is offering 24.5 euros, or about $35.42, a share in cash, but analysts told Reuters news agency that Tele Atlas could end up fetching as much as 30 euros, or about $43.37, a share. Garmin wants Tele Atlas to tender at least 66.67% of its shares.
"Given the high growth and rapid change the navigation market has undergone to date, we feel that now is the right time for Garmin to move ahead with this proposed combination with Tele Atlas," Garmin chief executive Min Kao said in a statement.
The market for navigation systems that guide travelers is soaring. Shipments of car navigation and global positioning systems are on track to more than triple worldwide by 2012 to 65.1 million units from 19.8 million in 2006, according to industry analysts at iSuppli. Driving sales is the growing popularity of personal navigation devices, which since 2001 has taken over the car navigation market that was once dominated by in-car systems.
TomTom and Garmin have experienced dramatic revenue growth, rising to billion-dollar companies during the last four years. TomTom's rise has been the fastest, reaching nearly $1.6 billion in revenue last year from only $10 million in 2002.
In trying to snatch up Tele Atlas, however, the two market leaders appear to be bracing for the 100 original design manufacturers from Taiwan and Korea that are expected to try to grab a portion of the sales boom. The biggest threat comes from Mitac of Taiwan, which owns the Mio brand and recently bought Navman.
Mio and Navman together captured 20% of the market last year, placing Mitac in the No. 3 spot behind TomTom and Garmin, which posted 37% and 25% market shares, respectively, according to iSuppli.
Nokia's acquisition of map data specialist Navteq is part of the leading mobile phone manufacturer's ambitious strategy of broadening its Web-based services. It's also a sign that Nokia plans to evolve its advanced mobile phones, called smartphones, beyond e-mail and multimedia to include capabilities that incorporate location information.
Meanwhile, Garmin on Wednesday reported that revenue rose 79% in the third quarter to $729 million from $408 million during the same period a year ago. Revenue from its car navigation business increased 118% to $519 million. Net income increased to $193.5 million or 88 cents a share, from $123 million, or 56 cents a share, a year ago.
The company forecasts revenue of more than $2.9 billion for the year, and earnings per share to exceed $3.40.