FRANKFURT Germany's premium carmakers Mercedes, Audi and BMW have teamed up with private equity firm General Atlantic to increase their firepower to acquire Nokia's mapping unit HERE, according to two people familiar with the matter.
Finland's Nokia started a strategic review of its maps business last month, setting in motion an auction process that has pitted Internet players like Uber and Baidu against carmakers in a deal that could be worth up to $4 billion. The review came after Nokia announced a 15.6 billion-euro takeover of network equipment maker Alcatel Lucent.
One financial industry source said on Thursday that General Atlantic would likely take a 30 percent stake in the auto industry-led consortium, but that the exact percentage had not yet been finalised and could change.
A separate source, from the auto industry, said that each of the three carmakers was prepared to chip in up to 700 million euros ($780 million) but that the percentage stakes of each manufacturer was not yet fixed.
The carmakers have made an indicative offer for an undisclosed amount. But they have not heard back from Nokia and are waiting for a response before they weigh whether to top up their bid, another auto industry figure said.
"The upper limit is basically what it would cost to build the maps through other means, by partnering with another player or going it alone, for example," the auto industry source said.
A second financial industry source said carmakers were ready to include other financial players in their consortium, but will demand they retain overall control of the map assets. There is no hard deadline for final offers but the process is at its end and could come to a head in days rather than weeks.
Nokia, Mercedes-Benz parent Daimler, BMW and Volkswagen's (VOWG_p.DE) Audi declined to comment. General Atlantic Partners, which is based in Greenwich, Connecticut, also declined to comment.
Analysts put the potential value of Nokia's HERE navigation business at 2 billion euros to 4 billion euros.
Based on current bids, the value has climbed to the upper end of that range, a second auto industry source familiar with the discussions said, adding that the $3 billion valuation mooted previously had been "overtaken by events" but that far higher estimates of up to $6 billion were exaggerated.
Local transport services firm Uber Technologies Inc is teaming up with China's web services provider Baidu and private equity firm Apax Partners to bid for HERE, for undisclosed terms, people with knowledge of the matter said.
Another group, which teams media, mobile and Internet services firm Tencent Holdings, map maker NavInfo Co., both of China, with Swedish buyout firm EQT Partners AB, is also bidding, three sources said, asking not to be identified as negotiations are private.
Auto industry players remain fairly relaxed about their chances as a snub to them could potentially be costly for HERE, as it depends on carmakers - which use its maps in vehicle navigation systems - for more than half of its revenue.
Carmakers are counting on these maps to provide crucial context for collision-detection systems in future cars. But they believe other options exist, including turning to rival TomTom, industry sources said.
"We are not out of the race as far as we know and Nokia would also have something to worry about if we were," the first automotive industry source said.
Morgan Stanley upgraded its stock rating on Dutch navigation software company TomTom on Thursday, arguing that the sale of HERE would leave it as the only independent global map maker.
Shares of TomTom jumped 7 percent on Tuesday after the company said existing customer Apple Inc had renewed a deal to license its maps in Apple products. The stock is now trading at levels not seen since 2009.
($1 = 0.8974 euros)
(Additional reporting by Andreas Cremer and Freya Berry; Writing by Eric Auchard; Editing by Elaine Hardcastle and Pravin Char)