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Garmin Ltd offers takeover of Dutch digital mapmaker Tele Atlas NV

The world's largest maker of personal navigation devices, Garmin Ltd., made a 2.3 billion EUR(US$3.3 billion) takeover offer for Dutch digital mapmaker Tele Atlas NV on Wednesday.

A bidding war for Tele Atlas has been seen as a possibility since Oct. 1, when Nokia Corp. announced a US$8.1 billion (5.7 billion EUR) takeover bid for Navteq Corp., the only major digital mapping company other than Tele Atlas with global operations.

On a conference call, Garmin's chief executive said the company felt forced to bid for Tele Atlas for competitive reasons.

"Historically, Garmin believed that an independent, competitive map duopoly served the industry well," CEO Min Kao said on a conference call.

"However, in the absence of this independent and competitive method of operating, Garmin must exercise its obligation to provide market leadership."

TomTom is Europe's largest maker of navigation devices, but the Cayman Islands-based Garmin is larger in the U.S. and overall.

TomTom sparked the rush to consolidate the high-growth digital mapping industry when it said it would buy Tele Atlas for 21.25 EUR(US$30.63) per share in July.

Tele Atlas had endorsed the TomTom bid, but said Wednesday it was reviewing its options in light of Garmin's higher offer.

TomTom spokesman Taco Titulaer said the company was studying the 24.50 EUR(US$35.31) per share Garmin bid and would reply in some form "in the near future," but said that could mean "several hours or several days."

He declined to say how TomTom would address the hard choice it now faces: either losing Tele Atlas or having to raise its bid - and possibly still losing. TomTom shares plunged 19 percent to 55.06 EUR(US$79.32) in Amsterdam, while Tele Atlas shares rose 15 percent to 27.58 EUR(US$39.73) - signaling that some investors were speculating the bidding would go higher.

Garmin's shares declined 4 percent Wednesday to US$115.64 (80.25 EUR).

Garmin CEO Kao cited strategic reasons similar to those of Nokia and TomTom in wanting to own a mapmaker: it will allow tighter integration of digital maps with the products that display them.

But fear of having to buy maps from a direct competitor is also likely playing a role.

Both Nokia and TomTom have given assurances that they would continue to sell maps to all comers if they win their respective takeovers, and Garmin echoed those commitments on Wednesday.

Analyst David Niederman of Pacific Crest Securities said each bidder was seeking a competitive advantage over its rivals, and that an element of hindrance was inherent in that.

"It's certainly a factor, but we'll never know how much of a factor it was in the decision to make a bid," he said.

"These companies are in the business of making navigation devices, not trying to cripple their competitors."

Garmin's Chief Financial Officer Kevin Rauckman acknowledged that the bidding by TomTom and Nokia sped up their decision.

"Given the significant changes that have just taken place recently in the industry in the last 90 days ... we just really believe that now is the right time for us to combine with a mapping supplier," Rauckman said on the conference call.

He said the company had considered developing its own mapping database, but decided that would be too expensive.

Tele Atlas' shares have traded above TomTom's offer price since the Nokia bid for Navteq, as investors speculated Garmin or another player such as Google Inc. or Motorola Inc. might enter the bidding - or that TomTom would at least have to sweeten its offer.

Niederman said it was impossible to say whether TomTom will now rebid.

TomTom has the financial capacity to raise its bid, and is a better strategic fit with Tele Atlas, as its single largest customer.

Garmin relies primarily on Navteq maps, and would probably prefer a merger with it, but Nokia's takeover of Navteq is seen as a certainty.

Garmin's market capitalization is four times greater than that of TomTom and it has the financial resources to outbid the Dutch company in an all-out bidding war if it were determined to do so, he said.

"Tele Atlas operates at a loss," Niederman said. "There's a question of 'winners curse' here. No one wants to win regardless of price, and TomTom could just walk away."

Separately, Garmin announced third quarter earnings of US$193.5 million (134.3 million EUR), up from US$123 million a year ago. Sales rose 79 percent to US$505.6 million (350.9 million EUR).

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