BRUSSELS — TomTom, Europe's biggest maker of car navigation devices, is expected to win unconditional European Commission approval to buy its main supplier Tele Atlas, industry and other sources say.
The Commission's decision is expected to answer critics' concerns that approval would leave TomTom in a position to hurt rival makers of navigation devices that also buy from Tele Atlas.
TomTom shares jumped following the news. They led gainers in the DJ Stoxx European technology index and were up 9.4 per cent at 22.59 euros by 1104 GMT. Tele Atlas shares were 6 per cent higher at 27 euros, 3 euros below TomTom's offer price.
A TomTom spokesman would not comment other than to say the company was in a “constructive dialogue” with the EU Commission.
The Commission, the European Union's top competition regulator, will announce its decision on the deal between the two Dutch companies by a May 21 deadline. U.S. antitrust authorities cleared the transaction last year.
Tele Atlas provides mapping data to a number of makers of car navigation devices, and to online mapping websites such as those of Google and Yahoo. It also sells to car makers, governments and others.
Tele Atlas is one of two major makers of digital maps worldwide, along with Navteq.
Nokia, the world's largest maker of mobile phones, has asked the Commission for permission to buy Navteq for $8.1 billion and is scheduled to get a reply by Aug. 8.
“The Commission never comments on ongoing merger investigations,” Commission spokesman Jonathan Todd said in reference to the TomTom deal. “A decision will be taken by May 21.”
BIDDING WAR
TomTom's U.S. rival Garmin opened a bidding war last year for Tele Atlas, forcing TomTom to raise its offer to 2.7 billion euros ($4.3 billion) from 1.8 billion, net of cash.
The enterprise value of the bid jumped from 28 times core earnings to 41 times earnings.
Opponents say TomTom will treat rival makers of navigation devices unfairly, giving them inferior products or uncovering plans they disclose to Tele Atlas to help with new designs.
Such arguments fell short. TomTom has argued that if it hurt its customers, they would go to Navteq.
TomTom has had to borrow so much money to buy Tele Atlas that it will need to keep attracting new business, said one industry source with no connection to TomTom.
TomTom made public promises in December that it would take steps to keep Tele Atlas independent. For example, it has promised to have a separate board.
TomTom never offered the European Commission any formal remedies to competition concerns and as a result the Commission may not impose any. But it may, as it has in the past, take note of TomTom's public commitments.
Such considerations would come into play not only in the Commission's decision, but in any appeal if third parties chose to challenge the Commission in court.
The European Court of Justice has held that when the Commission wants to block the merger of two companies that do not directly compete, it must have “clear and convincing” evidence that there is an incentive to damage others.
As TomTom's map supplier, Tele Atlas was never a direct competitor.
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