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SNS Research Morning Note
TomTom (Buy): Rights Issue and new capital for TomTom
The facts: EUR 430m shares issue, ‘no interest from Apple', and ‘no breach of covenants'. Shares for the EUR 359m equity offering will be issued for EUR 6.1234 per ordinary share. An EGM will be hosted on June 30, 2009 at 10.00 CET. TomTom gave a trading update noting it was satisfied on the April and May performance.
Our analysis: TomTom is planning to raise EUR 430m in a fully underwritten equity offering consisting of a EUR 359m rights issue and a EUR 71m private placement. The founders of TomTom holding 51.5% of the shares will participate in full for some EUR 169.3m. Janivo and Cyrte will take EUR 70m in the private placement and a further EUR 30m in the rights issue. The remainder will be underwritten by the banks (RBS, Rabobank, ING, Deutsche Bank, Goldman). The issue price of EUR 6.1234 per ordinary share is the 10 days average of last trading days.
Management gave a trading update stating shipments were moderately below expectations but the average selling price was better than achieved in 1Q09. Company remains comfortable that its EBIT is in line with market expectations. More details will be provided on the EGM at June 30, 2009. In a telephone conference today management said that there was no interest from Apple to take a stake.
The company amended its Facility Agreement which will require the net debt to ebitda ratio to be no greater than 3.5 at year and 1H10, below 3.0 at year end 2010 and no greater than 2.5 at June 30 2011 and below 2.0 thereafter.
Conclusion & Action: This equity raising will give more financial headroom and stability taking away speculations on a rights issue, which is positive to the shares. The rights offering in combination with the announcement that Apple is not interested to take a stake at least will take away speculation of a bid on the shares, which was the rumour last weak. The recent deal with Apple shows that there are enough opportunities in the market for TomTom.
We have a Buy on the shares with a price target of EUR 7.80 per share.
The analyst who covers this company is not at the office today, therefore we only will highlight the facts in this comment.
The update above was published in our Research Morning Notes for 15/06/2009 HTML and PDF