Garmin Hits Trouble Spot

"TomTom could see its proposed combination with Tele Atlas as a matter of life or death and will gradually raise its bid as high as its cash flow and capitalization will allow," Reiner said in a recent note to clients.

There's little doubt that TomTom will come back with a new bid -- something even Garmin has acknowledged in its recent conference call with analysts.

Shares of Tele Atlas were trading at $40.29 Monday, suggesting investors expect a higher counteroffer from TomTom.

That would force Garmin to raise its offer up to $59.32 a share. Reiner assigns a 40% probability to this scenario. CIBC makes a market in Garmin shares.

The possibility of such a bidding war has hurt Garmin's shares since its bid was announced. The stock was off another 4% on Monday to $94.32.

Given the health of its balance sheet, Garmin could effortlessly bid higher than TomTom, says Scott Sutherland, managing director and Garmin analyst at Wedbush Morgan.

"But it's more complex than the price," says Sutherland. "There are a lot of variables such as how dilutive the acquisition is and how easily Garmin can move its stuff over to Tele Atlas." Wedbush Morgan does not own shares or have an investment banking relationship with Garmin.