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 Germany's three premium carmakers joined forces and will hold equal
stakes in the business, known as HERE, clubbing together to keep the
assets from falling into the hands of Internet rivals in Silicon
Valley or China.
The deal has an enterprise value of 2.8 billion euros, including
liabilities worth nearly 300 million euros, for which Nokia will
compensate the carmakers, the Finnish company said on Monday. The
transaction is likely to close in the first quarter of 2016.
The deal allows the auto makers to offer new premium features, like
autonomous driving, in their luxury cars, shaking up the pecking
order between car makers, their parts suppliers and software rivals
like Uber [UBER.UL], Google or Apple.
"With the joint acquisition of HERE, we want to secure the
independence of this central service for all vehicle manufacturers,
suppliers and customers in other industries," said Chief Executive
Dieter Zetsche of Daimler, which invented the motor car in 1886.
But it is unclear how other HERE customers, including rival
carmakers, may respond to Germany's carmakers owning map technology,
which many in the auto, Internet and logistics industries see as key
to their own strategies.
"There is a risk that the other automakers will be pushed further
into the arms of Google," said Richard Windsor an independent
financial analyst who tracks major tech players.
HERE's primary competitor is Google Maps.
Intelligent mapping systems like HERE's are the basis on which
self-driving cars linked to wireless networks can perform functions
such as recalculating a route to the nearest electric charging
station or around a traffic jam or accident.
They are also used in everything from consumer smartphone navigation
to local transport services.
At a later stage, the carmakers will invite private equity firm
General Atlantic to join the consortium as an investor and potential
mediator, two sources familiar with the matter said. The size of the
stake has not yet been decided but could be up to a third of the
business.
SHIFTING RIVALRIES
HERE is the leading supplier of digital maps for most of the world's
top carmakers, accounting for half its expected $1.1 billion
revenues in 2015.
It also supplies mapping services to Internet customers including
Amazon, Yahoo and Baidu.
In addition, it competes with smaller Dutch mapping firm TomTom,
which has begun to retool its business to focus on carmakers rather
than consumers.
TomTom recently teamed up with Bosch [ROBG.UL], one of the world's
top auto suppliers, to create an alternative platform to HERE for
carmakers.
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HERE was created via the $8.1 billion acquisition of Navteq in 2008
by Nokia, which aimed to create consumer map services for mobile
phone users but later switched to focus on carmakers. Nokia is now
shedding its maps business as it integrates its purchase of telecom
network equipment maker Alcatel Lucent.
The Finnish company, which subsequently wrote down the value of HERE
to around 2 billion euros, said it expected to book a gain on the
sale to the carmakers, including cumulative foreign exchange
translation differences, of around 1 billion euros.
Mikko Ervasti, analyst at brokerage Evli, said the price was perhaps
a bit lower than what some had speculated and could be seen as a
"slight disappointment".
Shares in Nokia slid 0.9 percent in morning trading, underperforming
a flat European technology index. TomTom shares jumped more than 5
percent.
In bidding for HERE, the German carmakers appeared to use their
status as key customers to fend off other bidders, said analyst
Mikael Rautanen of Inderes Equity Research. "That is why the price
was lower than initially expected," he said.
Operating systems for self-driving vehicles, as well as services
associated with autonomous driving such as car-sharing, recharging
and parking services, may become money-spinners for carmakers
seeking new business beyond manufacturing.
Self-driving and connected car services could become a $50 billion
market, analysts at Exane BNP Paribas have estimated.
Andreas Tschiesner, head of McKinsey's automotive practice in
Germany, said: "The automotive industry is facing a big disruption
through connectivity and connected driving technologies. These
features will become an important source of differentiation."
(Writing by Eric Auchard; Additional reporting by Arno Schuetze in
Frankfurt, Jussi Rosendahl in Helsinki and Leila Abboud in Paris;
Editing by Jane Merriman and Susan Fenton)
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