TomTom Tops Garmin's Bid for Tele Atlas

If Garmin does bid higher than TomTom, it may have to reckon with the possibility of not having full control of Tele Atlas. And losing the bidding war for Tele Atlas to TomTom would put Garmin in an unfavorable position where its major data suppliers are owned by rivals looking to eat into its market share.

"Any action that Garmin takes will likely negatively impact its stock price," Aaron Husock, an analyst with Morgan Stanley told clients in a research note. "We expect Garmin shares to drift lower as earnings estimate revision momentum fades and the Tele Atlas bidding situation becomes increasingly dilutive and messy." Morgan Stanley owns shares of TomTom and has an investment banking relationship with the company.

Garmin clearly needs Tele Atlas. It faces a duopoly mapping industry where the two data suppliers, Navteq(NVT Quote) and Tele Atlas, are no longer likely to be independent.

Last month, Nokia(NOK Quote) offered to buy Navteq for $8.1 billion, while TomTom made the first bid for Tele Atlas in July. Garmin responded with a bid for Tele Atlas more than three months after TomTom's bid. Garmin declined to comment for this story.

With TomTom's revised offer on the table, Garmin has five business days to match the price. If Garmin bids higher, TomTom, which is taking a 28% stake in Tele Atlas, retains the first rights to match Garmin's higher price.