HERE Acquisition: What Does it Mean?



HERE Acquisition: What Does it Mean?
Audi, BMW and Daimler have announced today the acquisition of digital map platform HERE from Nokia. This deal does not come as a surprise because the discussions were already not only rumored but also acknowledged publicly by Audi executives.

Now that we have a a confirmed group of buyers and a price it is time to look at the specifics of the deal and the impact of the acquisition.

A Moderate Valuation Far away from Silicon Valley’s Hype
The first thing to be considered is the valuation of HERE in the deal. The total consideration for the deal is €2.8 Billion, however the real value paid by the premium German car makers is €2.5 Billion.

Nokia indeed stated the following: “Upon closing, Nokia estimates that it will receive net proceeds of slightly above EUR 2.5 billion, as the purchaser would be compensated for certain defined liabilities of HERE currently expected to be slightly below EUR 300 million as part of the transaction.“

The previous valuation of the business was made by Nokia in October 2014 for a financial purpose (read here) and was €2 billion. a 20 percent premium over that price but nothing more.

No Bidding War
So, where are the rumored bids from Baidu, Uber, etc… today? Nowhere…

This confirmed our assumption (read here) that the supposed bidding war for HERE was just made of smoke and mirrors with leaks carefully spread by talented Nokia people to the business media eager to write stories without much information (and sometimes real nonsense).

It does not mean that mobile and web companies are not interested in maps but they likely prefer to license it from the current vendors, use free data from Openstreetmap or build their own databases on purpose as Apple and Uber (with smaller acquisitions) are doing today.

Unlike in 2007 where map companies' valuations reached their peak (€5.3 billion for NAVTEQ), this time we have a normal deal.

This obviously does not undermine the true value of HERE that posted last year a revenue of more than €960 million. In 2015 this revenue will be in excess of one billion and the operating margin between 9 percent and 12 percent (up from 7 percent last year). More than 60 percent of this revenue is made of automotive licenses that are growing fast (read here).

Continued...

Monday, August 3rd 2015


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