|EU to approve TomTom/Tele Atlas deal; look at Nokia/Navteq more closely - source|
March 19, 2008: 11:38 AM EST
BRUSSELS, Mar. 19, 2008 (Thomson Financial delivered by Newstex) -- The European Commission is expected to approve personal navigation device manufacturer TomTom NV's proposed acquisition of map maker Tele Atlas NV and open an in-depth inquiry into Finnish mobile telecoms group Nokia (NYSE:NOK) Oyj's planned buy of digital map maker Navteq (NYSE:NVT) Corp.
A legal source told Thomson Financial News that the TomTom/Tele Atlas deal should be cleared on or before the deadline of May 5, even though there are 'clearly vertical competition concerns'.
The commission opened an in-depth inquiry into the deal in November after its initial market investigation indicated that the proposed merger raised serious doubts with regard to vertical competition concerns. Since then, the commission extended the deadline for the inquiry at the parties' request.
'This seems to be a concentrated market at upstream level and access to data will be a key issue in terms of remedies,' the source said.
'The commission obviously has suggested serious concerns (about the deal) but they should be addressable through making data available to third parties.'
The source said the key factor in negotiations over potential remedies will be assessing how to preserve the companies' value.
A possible remedy could be the sale of data which could devalue the company, the source said.
An Amsterdam analyst said earlier that he would find it difficult to defend spending 3 bln eur on a database company, if its intellectual property had to be given away.
The legal source noted that the commission would probably open an in-depth investigation into Nokia's proposed 8.1 bln usd acquisition of Navteq as competition issues would be similar to those in the TomTom/Tele Atlas deal.
Analysts were even confident at the opening of the TomTom/Tele Atlas inquiry that the commission would clear the transaction.
ABN Amro's (NYSE:ABN) Wim Gille said he did not believe the extended review would cause any problems for TomTom.
'Based on the conversations we had with TomTom, Garmin, Tele Atlas, Navteq and several other market participants, based on public statements made by Nokia and Mio, based on the deal structure (vertical integration, operated at arm's length), (and) based on the consensus expectation that the combination would benefit the end user, we do expect this deal will eventually be closed,' the analyst said.
Another Amsterdam-based analyst agreed, saying: 'It's impossible to judge exactly what the EU will do in this case, although it does seem highly likely to us that approval will be given and TomTom will walk away victorious.'
TomTom's chief executive Harold Goddijn told journalists in December he was confident the EU executive would approve the deal.
The CEO said he thought the commission would have approved the deal in a phase I inquiry if Nokia had not bought Navteq, and added that the extension of the inquiry into phase II was intended mainly for the commission to further familiarise itself with the market.
'There is already a duopoly in effect,' Goddijn said.
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