Dutch navigation systems company TomTom plans to buy its main supplier of digital maps,
Tele Atlas, for 1.8 billion euros ($2.5 billion) in cash, the companies said on Monday.
TomTom, which also announced quarterly results a week early that showed net profit leaped 81 percent from a year earlier, said it intends to make a cash offer of 21.25 euros per share
for Netherlands-based Tele Atlas.
The offer represents a 32 percent premium over the Tele Atlas average share price in the last three months and values the equity of Tele Atlas, which has a net cash position, at 2 billion euros, TomTom said.
TomTom will fund the acquisition with debt and cash, TomTom Chief Financial Officer Marina Wyatt told reporters on a conference call.
"The transaction will be accretive on a cash basis within 12 months of completion of transaction," Wyatt said.
TomTom is paying 28 times Tele Atlas's projected 2007 adjusted EBITDA, it said.
Tele Atlas supplies map images and data for online mapping Web sites such as Mapquest and Google, as well as navigation system makers and mobile phone makers like Nokia.
TomTom Chief Executive Harold Goddijn said Tele Atlas would continue to supply maps for TomTom navigation devices and also keep supplying others with digital maps.
TomTom Affirms Guidance
TomTom, which joined Amsterdam's blue-chip index last year, kept its 2007 sales forecast of 1.6-1.8 billion euros and said it expects to sell between 8 to 9 million navigation devices this year. Previously, it forecast shipments of 7 to 8 million units.
TomTom said its second-quarter net profit rose to 68 million euros from 38 million a year earlier. Sales rose 37 percent to 380 million euros.
Rabo Securities analyst Frits de Vries said TomTom's earnings were "significantly ahead" of expectations, with the number of sold devices above his forecast of 1.6 million units.
TomTom, which competes against Garmin, said it sold 1.8 million portable navigation devices in the second quarter. The average selling price, a closely watched measure of profitability, was 195 euros, down 4 percent from the previous quarter.
TomTom said it sees a gross margin of at least 40% and operating margin of at least 20% for the full year.