BRUSSELS (Thomson Financial) - Personal navigation device manufacturer TomTom NV's proposed acquisition of digital map maker Tele Atlas NV is coming under renewed scrutiny as the company prepares to present ways to make the European Commission amenable to the deal this week.
The commission's deadline for its in-depth, 'Phase II', inquiry is May 5. It may either clear or block the transaction.
Sources familiar with the matter told Thomson Financial News that TomTom is preparing to offer to sell its archived map database to a third party to allay the commission's concerns over the deal's effect on competition.
Attached to this remedy, TomTom would have to provide support to the third party to make sure it has the necessary technology to update the database properly.
Another source said the remedy is 'feasible' if TomTom is looking to grow through the publication of new maps, adding that selling the map archive business could be profitable but runs the risk of diminishing the value of the Tele Atlas acquisition for TomTom.
'If it (TomTom) sells the map archive business, it defeats part of the objective of the transaction,' the source said.
A TomTom spokesman declined to comment on whether the Dutch personal navigation device maker is sending a remedy package to the commission this week, nor would he indicate what such a package might include.
But the spokesman said TomTom will issue a press release no later than Monday, when its extended tender offer period for Tele Atlas ends.
'We're in discussions with the EC and based on the outcome of those discussions we will have a better picture of what we need to say in our press release,' the spokesman said.
Last week, a legal source suggested to TFN that the TomTom/Tele Atlas deal should be cleared on or before the deadline, even though there are 'clearly vertical competition concerns'.
The source suggested data access will be a paramount concern when remedies are offered because the market is so concentrated at an upstream level.
'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.
Rather than selling the database, alternative proposals could include the creation of a 'third party' -- an independent player that would compete against Tele Atlas and rival Navteq Corp.
An independent distributor for Tele Atlas' content was also considered a possible remedy but is not widely seen as addressing fears Tele Atlas would lose customers over concern about the confidentiality of trade secrets.
Sources said all eyes are looking to tomorrow, when the commission is due to decide whether to approve or open an in-depth investigation into Nokia Oyj's proposed acquisition of digital map maker Navteq.
The commission is believed to be concerned that the TomTom/Tele Atlas deal could strengthen rival Navteq.
Legal sources are expecting the EU executive to open an in-depth inquiry into the deal.
nina.chestney@thomson.com nc/sal COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2008 AFX News
