Germany’s big-three premium-brand auto makers are preparing to launch a formal bid to acquire a majority stake in Nokia Corp. ’s Here mapping unit, in a consortium that includes Chinese technology group Baidu Inc. and values Here at “considerably more than €2 billion,” according to people familiar with the situation.
BMW AG , Audi AG , and Daimler AG ’s Mercedes-Benz are usually fierce rivals in the market for luxury automobiles. But they are so worried about Silicon Valley’s ambitions that they are banding together to acquire Nokia’s mapping unit to prevent a technology giant such as Google Inc., Apple Inc. or Facebook Inc. from gaining control of a key part of the technology needed to run self-driving cars and in-car digital services.
“The greatest threat to the automobile industry would be if Google developed an operating system for self-driving cars and made it available free to everyone,” said a person familiar with the situation. “We need the map for the operating system in the cars.”
Talks have reached an advanced stage and are likely to conclude within the next two weeks, according to people familiar with the situation. Specific details such as price and the distribution of specific stakes are still in flux, these people said.
The German car makers are aiming to acquire a controlling majority. Baidu and an undisclosed financial investor in the group would acquire minority stakes. Nokia would retain a minority stake.
Nokia, which last month raised the possibility of selling Here, said during its annual shareholders meeting on Tuesday that it could still decide to keep the mapping service.
But people familiar with the situation said the company is negotiating to sell most of Here and is confident that the German-led consortium could easily finance and quickly close a deal and that the Germans will invest in the business.
A second investor group made up of several undisclosed private-equity investors is looking to finance an acquisition of Here using debt, which one person said could make it difficult for Here to invest in its growth.
Nokia declined to comment.
The German auto makers hope to stay a step ahead of Google by taking control of Nokia’s Here, which one person described as the most advanced digital mapping service in the world. The car makers plan to invest further in the service to transform it into the eyes and ears of self-driven cars and the foundation to develop in-car digital services.
Separately, Audi is expected to announce a “far-reaching cooperation” with China’s Baidu at the China CES consumer electronics show in Shanghai later this month, the person said. Baidu is an important partner because it is creating a high definition map of China, the world’s biggest car market by sales. Google is not allowed to map China.
Under the agreement with the German consortium, Baidu can use Here’s technology only in China. Baidu declined to comment.
Another person familiar with the car makers’ plans said the consortium of German premium car makers approached German Chancellor Angela Merkel, asking her to encourage the Finnish government to back the German bid. It is unclear whether Ms. Merkel acted on the request. Nokia is based in Espoo, Finland.
The German government declined to comment.
German auto makers began thinking about acquiring the Here business after Nokia announced on April 15 that it would conduct a “review of strategic options, including a potential divestment” of Here. The review was prompted by Nokia’s deal to acquire network equipment maker Alcatel-Lucent.
Nokia saw Here as a strategic asset for its mobile-phone business. In 2008, Nokia expanded the service with the acquisition of a company called Navteq to help it integrate the mapping services in Nokia’s mobile phones. After Nokia sold its mobile-phone business, it began to question Here’s strategic rationale.
Here generated a loss of €32 million last year, but the business is growing. It generated revenue of €970 million in 2014, an increase of 6% from the year before. Nokia has identified Here’s fair value at about €2 billion, or $2.24 billion.
In addition to the German auto makers, Here’s customers include General Motors Co, Ford Motor Co, Jaguar Land Rover, Honda Motor Co, Nissan Motor Co and Renault SA. Here says it controls about 80% of the market for on-board navigation systems in cars in the U.S. and Europe.
On April 29, Nokia executives discussed a potential sale of a majority stake in Here with negotiators representing the German car maker consortium, one person familiar with the talks said. The talks focused on price and on the concern of the German car makers that a sale of Here to a U.S. technology company could pose a competitive threat to European auto makers.
Another person familiar with those talks said the German car makers, a large customer of the Here service, threatened to stop using the service if it were sold to a company like Facebook or Uber Technologies Inc. The German car makers have since toned down their language, fearing such threats could lead to suspicion they are building a cartel, the person said.