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123webguru News Desk
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By Niclas Mika
AMSTERDAM (Reuters) - Shares in Dutch navigation systems company TomTom rose as much as 4.7 percent above their issue price on the first day of trading on Friday, valuing the firm at almost 2 billion euros ($2.5 billion).
TomTom, which makes portable navigation devices and mapping software for handheld computers (PDAs), said it would raise 125 million euros from the initial public offering. The remainder of the 469 million euro proceeds will go to existing shareholders.
The offer of 26.8 million shares represents a quarter of the company's shares outstanding. There is also a greenshoe option of four million shares that the underwriters can exercise within 30 days.
TomTom, which generates 97 percent of its turnover in Europe and wants to tap the U.S. market, said it would use the proceeds from for international expansion and developing new products.
"This will help to strengthen our leadership position," Chief Executive Harold Goddijn said on the floor of the Amsterdam stock exchange after the shares began trading.
By 1115 GMT, the shares rose 2.5 percent above their 17.50 euro issue price to 17.93 euros. Earlier in the session, they had risen as high as 18.33 euros.
"It's a big growth story. Financially, the company is very healthy, therefore I think there's very little downside risk in the short term," equity salesman Sebastiaan Masselink at Dutch brokerage Petercam said shortly before the shares began trading.
"The market has been hungry for an IPO for a long time, especially in the Netherlands."
The company has forecast revenues to at least double this year at a stable operating margin, which stood at 22.9 percent last year.
COMPETITION
But analysts have warned that TomTom, which has captured a 52-percent market share with its portable navigation device TomTom Go, could face strong competition soon as more players enter the rapidly growing market.>
"The main challenge for coming years will be to develop the 'Go' into a product that can do more than navigate," said Van Lanschot analyst Marc Kennis.
He said U.S. software giant Microsoft was already developing a "TBox" for cars that would offer navigation, digital music, hands-free telephone calls and Internet access.
Kennis said the issue price of 17.50 euros valued TomTom at about 21 times 2007 earnings, according to his calculations.
The Nasdaq-listed maker of hand-held navigation devices Garmin, by comparison, trades at about 18 times expected 2005 earnings, according to Reuters data.
Kennis said because of uncertainty over competition and future products, a price closer to the lower end of the 14 to 18.50 euro subscription range would have been more appropriate.
Sources familiar with the order book said the issue had been 10 times oversubscribed.
"We are very delighted with the level of interest shown in the offer and the high quality of the investor base," TomTom Chief Financial Officer Marina Wyatt said.
More than 10 percent of investors were in the United States, and in Europe, there was a "good spread across major European markets," she said.
TomTom's IPO is the second on the Euronext Amsterdam market in a month. Early May, Dutch-Belgian genomics firm Galapagos was listed in Amsterdam and Brussels, one year after sports car maker Spyker went public.
Goldman Sachs International and Lehman Brothers were acting as joint global coordinators and joint bookrunners. Fortis Bank , Kempen and Rabo Securities were co-lead managers. (Additional reporting by Wendel Broere) ($1=.7956 Euro)
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