Monday June 15, 08:48 AM
TomTom's share price drops on rights issue plan
* Expects to stay within amended loan covenants
* Not approached by Apple (NASDAQ: AAPL - news) for stake
By Harro ten Wolde
AMSTERDAM, June 15 - Shares in Dutch navigation device maker TomTom (Amsterdam: TOM2.AS - news) fell on Monday after unveiling plans to raise 430 million euros ($600 million) by issuing new stock to pay down part of its debt.
TomTom's shares were down 5 percent at 7.06 euros in early trade, underperforming a 1 percent lower Amsterdam blue chip index and valuing the company at around 925 million euros, according to Reuters data.
The new shares are to be sold via a combination of a private placing and a rights issue, with the sum to be raised amounting to nearly half of TomTom's market capitalisation on Friday of 934 million euros ahead of the announcement.
'The share issue should be enough for TomTom to get through the downturn,' said asset manager Rob Koenders of Dutch Harmony Vermogensbeheer.
The debt-laden company said the offering would consist of a 359 million-euro rights offering and a 71 million euro private placement with two investors, who will pay 6.1234 euros per share.
'We have evaluated a number of options over the last months. This was the right structure and also the right timing to do a rights issue,' Chief Executive Harold Goddijn told reporters on Monday.
Details of the rights issue, in which Goddijn and three other company founders will also participate, will be published later, the company said.
TomTom confirmed that it had paid an amendment fee to change its debt covenants, but declined to disclose how much. 'We are within our covenants and expect to remain within them,' Chief Financial Officer Marina Wyatt said.
TomTom is struggling under heavy debt taken on when it bought Dutch digital map maker Tele Atlas (Amsterdam: TAAGM.AS - news) for 2.9 billion euros last year after a bidding war with U.S. rival Garmin (NASDAQ: GRMN - news) . At the end of the first quarter, TomTom's net debt was 1.159 billion euros.
From net proceeds of the issue, debt will be reduced to about 700 million euros.
TomTom shares had rallied last week, first from its unveiling of a new navigation application for Apple's iPhone and on subsequent talk that the U.S. group would take a stake in TomTom.
But Goddijn said TomTom was not approached by Apple.
'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,' SNS Securities analyst Martijn den Drijver said in a note.
($1=.7191 euros)
(Additional reporting by Gilbert Kreijger; Editing by Greg Mahlich) Keywords: TOMTOM/
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