GPS-Device Maker TomTom to Sell New Shares

Excerpt of Article from Wall Street Journal Online

TomTom NV, a Dutch navigation-products maker, plans to raise about €430 million ($607 million) by selling new shares to alleviate a heavy debt burden.

TomTom said in a statement late Sunday that it plans to sell a roughly €100 million stake to Cyrte Investments BV, a Dutch technology investor, and Janivo Holding BV, an early investor in a predecessor of the company. It will also tap existing shareholders in a so-called rights issue.

The company is saddled with €1.4 billion in debt following its agreement to purchase fellow navigation firm Tele Atlas for €2.9 billion near the height of the merger boom in 2007. Amid slumping demand brought on by the global recession and increasing competition, investors have grown concerned that the company could violate the terms of its loans.

The proceeds of the share sales will be used to repay debt, the company said. Cyrte and Janivo will end up with a total stake of 8% in TomTom, whose lenders have agreed to relax the terms of its remaining debt. TomTom’s decision to invite investments from sophisticated investors with experience in the sector is aimed at increasing the odds that the rights issue will be well received by other shareholders.

Janivo is the investment vehicle of Holland’s de Pont family, which made its fortune in the auto-import business and was an early investor in Tele Atlas. It sold its stake to TomTom for much more than the stake would now be worth.

The new investment is a bet by the family and Cyrte that in spite of current difficulties, demand for the company’s navigation services will grow over the long term.

TomTom has been seeking to expand beyond its core market of personal GPS-navigation devices, or portable electronic units that provide maps and directions. It already has a deal with Renault SA to install navigation gear in the French auto maker’s cars, and last week it said it will provide software for Apple Inc.’s iPhone.

The investment from Janivo and Cyrte also represents a bet that TomTom will benefit from the broadening use of its products for services such as traffic and weather reports. TomTom’s maps are expensive to compile and maintain, making it difficult for new competitors to enter the business.

TomTom reported €213 million of sales in the first quarter, a decline of 31% assuming that the Tele Atlas deal had been completed in the year-earlier period. It had a net loss in the quarter of €33 million.

Investor concerns have hammered TomTom shares, which have recently traded at around €7, down from nearly €70 in late 2007. The stock surged 22% Friday in Amsterdam to €7.48 on enthusiasm over the Apple deal and hopes that the U.S. computer maker will buy a stake in TomTom. A person familiar with the matter said that doesn’t appear likely. The share price gives the company a market value of €934 million.

Atlas Advisors acted as financial advisor to Cyrte Investments and Janivo Holding in connection with this transaction.

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