GPS navigation vendor outbids rival to buy map maker

Garmin has launched a €2.3bn bid to acquire Tele Atlas in an attempt to outshine an earlier offer by TomTom.

Garmin is the world's largest maker of personal navigation devices. TomTom ranks as the second largest vendor in the fast growing segment, and outships Garmin in its European home market.

Tele Atlas is the smaller of the world's two worldwide digital map providers. Early October, Nokia agreed to acquire Navteq, the market leader, for €5.4 billion in cash. Analysts had speculated that the recent consolidation in the digital mapping market would attract rival bids.

The Navteq and Tele Atlas acquisitions forced Garmin to put out its offer, the company argued. The rival acquisitions would force the company to rely on maps supplied by its competitors. They could easily undermine the quality of Garmin's products by delaying delivery of information or refusing to sell the latest updates.

"In the absence of an independent and competitive map duopoly that served the industry well, Garmin must exercise its obligation to provide market leadership, " Garmin said in a statement.

"Garmin believes that it is best equipped to do this through the acquisition of Tele Atlas."

Tele Atlas had previously endorsed TomTom's offer. Shareholders and board members representing 17.4 per cent of the company's outstanding shares committed to tender their shares to the offer when it was first announced in July.

Tele Atlas said in a press release that it would review the terms and conditions of the offer. The company's board will meet with Garmin within 7 days.

TomTom hasn't responded to the rival offer, but investors appear to be expecting a bidding war. News of the bidding war caused TomTom stock to drop by 18.7 per cent. Garmin stock fell by 11 per cent.

Garmin's offer represents €24.5 per share. Tele Atlas stock closed 15 per cent higher at €27.6, indicating that shareholders expect TomTom to raise its offer.