NEW YORK (The Deal) -- German automotive supplier Continental AG (CTTAY) Tuesday agreed to buy the automotive software unit of Elektrobit (EBTTF), preempting a planned split at the Finnish technology company and boosting its own software activities as carmakers scramble to produce self-driving models.
Continental, which is based in Hanover, Germany, will pay 600 million euros ($671.8 million) for Elektrobit Automotive, which is based in Erlangen, Germany. Continental as already secured the backing of the Elektrobit board as well as shareholders owning 46% of the seller's stock.
"The acquisition will fit well with the automotive supplier," wrote Commerzbank AG analyst Daniel Schwarz in a note. "Elektrobit Automotive is profitable and closely connected with Volkswagen AG (VLKAY). It's a positive deal." Schwarz has a hold rating on Continental shares.
Carmakers around the world are scrambling to meet consumer demand for cars that are not only continuously connected to the Internet but also have the capability to drive themselves. Finnish telecommunications company Nokia (NOK) has discovered a strong appetite for its Here mapping division since maps will be key to cars that can at least partially navigate themselves.
German car companies, investors and even limo company Uber Technologies are all reportedly vying for that division, which analysts have said could go for as much as 3 billion euros.
Elektrobit appears to have put automotive division up for sale in February when it announced plans to spin out its larger, mobile phone software unit, based at the corporate headquarters in Oulu, Finland, and rename it Bittium. The smaller, German-based automotive division would have retained the Elektrobit name as well as the company's current Helsinki listing.