|Navteq may navigate smoothly by EC|
by Scott Stuart
Updated 06:09 PM EST, Feb-28-2008
Market rumors that the European Commission's review of TomTom NV's acquisition of digital map company Tele Atlas NV is moving forward have raised hopes that the similar $7.7 billion merger of mapping company Navteq Corp. with Nokia Oyi could get past the European regulator without an extended review.
The TomTom-Tele Atlas deal was pushed into a second phase review Nov. 28, and the EC was expected to file its statement of objections this week. Risk arbitrageurs think that the issuance of the SO has been delayed for 10 days at the request of TomTom. The implication is that the company is offering some form of concession to address the concerns of the regulator, which would need to be market tested.
Arbs think this means the EC review of the Tele Atlas deal is moving along well, which in turn implies that Nokia's acquisition of Navteq could be approved swiftly.
Nokia and Tele Atlas announced their deal Oct. 10 and notified the EC under European Union antitrust regulations Feb. 19. The deadline for the first-phase review of that deal could be March 28.
Under the EC's rules, that could be extended 10 business days if the regulator is market testing undertakings proposed by Nokia.
Shares of Navteq have risen roughly $1 since Wednesday to $75.70 as it appeared that the close could come sooner than expected.
On Thursday, Navteq traded at a spread of $2.30, or 3%, to their $78 value under Nokia's all cash deal.
Navteq shareholders approved the merger Dec. 12, and it received early termination from U.S. antitrust regulators Dec. 5. The acquisition of Navteq cleared a review by the Committee on Foreign Investment in the United States on Dec. 6. The deal still hinges on the EC approval.
The transaction could also be subject to review in individual European jurisdictions, but the merger agreement provides that Nokia close the deal provided that such "foreign antitrust conditions" do not entail waiting periods or concessions that would impair the company's operations or result in substantial fines.
The deal, therefore, should be able to close when Brussels signs off.
Arbs have been scrutinizing the Tele Atlas review process in Europe for clues as to how the Navteq deal will proceed there. But there are reasons to think the Navteq deal could escape a phase-two review regardless of the outcome of the Tele Atlas deal, sources said.
Nokia is not a primary competitor in the market for personal navigation devices, as TomTom is, so that deal does not raise the same concerns as the tie-up between TomTom and Tele Atlas, where TomTom could in theory limit its access of competing navigation devices to digital mapping data. Moreover, Navteq entered an extended contract to provide such data to Garmin International Inc. in November when Garmin dropped its own bid for Tele Atlas.
TomTom is likely offering the EC assurances that it will provide similar long-term contracts with other PND providers, as Nokia proactively did, sources said.
The proxy for the Navteq deal reveals that, in early conversations, Nokia said that it planned "to run Navteq as a largely independent entity in view of the financial importance to Nokia of continuing to serve and grow the Navteq customer base."
That should placate competing device makers. TomTom's competitors could feel much more threatened.