Some Final Thoughts on TomTom-TeleAtlas
(Just a minor editorial note before we start: I do not hold that either the TomTom/TeleAtlas or Nokia/Navteq deals or the structures proposed for the businesses are anti-competitive. The issue for many is the potential future strategies these firms might put on the table, but I doubt that either TomTom or TeleAtlas has developed a realistic, multi-year plan for the businesses they hope to acquire. However, if the leaks to the press on the proposed structural remedy for TomTom’s acquisition of TeleAtlas is true, then we might see a similar proposal applied to Nokia/Navteq – hence my interest.)
Last time we were discussing TomTom and the possible influence of the European Union’s Stage II review on its attempt to acquire TeleAtlas. The point where we dropped off was just before we started debating the “moolah” that would be required to fund the “archived map database” business, which has been suggested as the only practical, structural remedy to the perceived “anti-competitiveness of the deal”.
Since we are talking money here, we should note that in today’s financial news TomTom cut its earnings estimate. TomTom’s stock has been falling for months (down around 50% from its price at the time of the acquisition announcement) and TomTom’s valuation is now less than the price they have agree to pay for TeleAtlas! If ever there was a time to rethink the deal, this is probably it.
At the end of our last post, we concluded that TomTom, in order to satisfy the proposed structural remedy, would have to clone a version of TeleAtlas to meet the presumed requirement that the spin-off be an operable business. So, how much would that business be worth? Well, the usual answer is what someone is willing to pay for it (not what someone is willing to sell it for).
If I have my facts right, no one was willing to bid for TeleAtlas except Garmin and it remains unclear whether or not they were bidding in good faith. Anyone who listened to their conference call on the topic would have had doubts about their intent. Of course, at the same time they were bidding on TeleAtlas, it appears that they were also negotiating with Navteq and may have needed a big stick to get the deal terms of interest to them. Since they are now sitting on a decent, multi-year deal with Navteq, they may not have an interest in bidding for “TeleAtlas – the Clone”.
However, no one else was interested in matching TomTom’s original €2.1 billion bid. If the company was not considered a value by anyone else at the initial price, it is axiomatic that no one would be interested in paying a multiple for the spin-off, based on the final price.
Pick a number between € 1 and 1.5 billion and you might be close to the value the TomTom would put on the spin-off of a TeleAtlas clone. I’m not sure that anyone would be interested in paying in that range. However, if the deal were not in that range, it would seem that TomTom would be very challenged to pay the € 2.9 billion purchase price for TeleAtlas.
Now that they are worth less than their bid for TeleAtlas, TomTom will have to spend a great deal of thought on deciding what it is they want to be when they grow up. My bet – it won’t be a PND manufacturer! Next, if TomTom is ever going to get a good case of “buyer-to be remorse”, which translates to “Whoops, I’m overpaying” it should be between now and the end of May.
Finally, if they are overpaying, is the multiple that TeleAtlas is paying for a profitable Navteq too high? How about too high if the TomTom deal falls through and the EU suggests that Nokia clone Navteq to relieve the anti-competitive issue?
Of course, there really is no truth to this cloning story. Is there?
Well, I’ve had enough of this one (at least in public forums) so next time, I will share with you some thoughts about TomTom and customer service. Yep, I have been using that TomTom 920 and have had some humorous encounters. After that brief digression, I’d like to get back to UGC and some Local Search issues.