TomTom Tops Garmin's Bid for Tele Atlas

Navigation devices maker TomTom raised the ante considerably Wednesday when it offered $4.2 billion for digital mapping firm Tele Atlas.

The cash offer of $43.99 (30 euros) for a share of Tele Atlas represents a 41% increase above its previous offer. And it is 27% higher than rival Garmin's(GRMN Quote) bid of $35.92 (24.50 euros).

TomTom also unveiled plans to purchase a 28% stake in Tele Atlas from the company's shareholders.

TomTom's offer now values Tele Atlas at €2.9 billion ($4.2 billion), but an analyst last week suggested the value of Tele Atlas could reach as high as $5.5 billion.

Tele Atlas shares soared 5.11 euros ($7.49), or 18.9%, to 32.06 euros ($47.01) Wednesday on the prospects of a heated bidding war. Meanwhile shares of TomTom were off 1.53 euros ($2.24), or 2.3%, to 55.01 euros ($80.68).

Shares of Garmin sank $8, or 7.9%, to $92.56 in recent trading. The stock is down nearly 23% since the company's Oct. 31 bid for Tele Atlas.

The latest developments leave Garmin with few options. In its conference call with analysts last week, Garmin suggested that it was expecting a counter offer from TomTom, but the size of TomTom's latest offer and its strategic move to acquire a 28% stake may have surprised company officials.