FRANKFURT (Reuters) -- German automakers may need help to buy Nokia's mapping unit HERE as a rival bid from technology company Uber signals interest from deep-pocketed Silicon Valley players.
High-definition mapping is emerging as a key feature for autonomous driving and connected car services. Daimler, owner of Mercedes-Benz, BMW and Volkswagen's premium car division Audi have joined together to submit an indicative bid for HERE as a consortium, two sources close to the companies told Reuters.
The German carmakers can probably justify paying about 700 million euros each to match HERE's book value but could be easily outbid by technology companies who enjoy higher valuation multiples and have more cash, bankers and executives close to the deal said.
Some investment bankers said they hoped private equity could join up with the automotive companies to create an industrial consortium which would not be dominated by one particular company.
Taxi service Uber has submitted a bid, worth $3 billion, the New York Times reported, citing people with knowledge of the offer.
At such a price, Nokia could afford to keep a stake in the business it bought for $8.1 billion in 2007 and now values at 2 billion euros in its books and still realize a gain, one banker told Reuters.
The companies declined to comment.
HERE's high-quality maps enable automakers to offer premium services that Google maps cannot match. For example, their maps can be linked to a mobile phone signal in a way that allows parents to see exactly on which side of the school their children are waiting to be picked up - and the car can route the navigation system accordingly.
They could also combine with real-time traffic information in a self-driving car to help customers get to work faster or spend more time writing emails on the way to the office.
Daimler's Chief Financial Officer Bodo Uebber told German daily Handelsblatt in comments published on Friday: "We are watching the situation closely. High-definition maps are a prerequisite for autonomous driving."
While HERE has become increasingly distant from Nokia's core operations as it prepares to integrate its giant acquisition of telecom networks rival Alcatel-Lucent, the Finnish company may still have an interest in retaining a stake.
Nokia has hired advisors from Evercore to test the market for potential buyers and solicited a second round of indicative bids, a person familiar with the matter said.
Although it remains unclear how many parties are competing, bankers say there is a rivalry between two categories of bidders: the industrials and tech companies.
The auto companies cannot afford for HERE to fall into the hands of a player such as taxi app company Uber or Apple, which may block their access to it. They also want to have a say in the development of the company Nokia bought for $8.1 billion in 2007 because they are HERE's largest customers.
"We do care who ends up owning this business," an industry source familiar with the matter told Reuters.
Bankers say HERE is a natural asset for Apple, which has fallen behind in the area of mapping, although the Californian technology company has given no sign of being interested.
With a market capitalization of $721 billion, Apple is worth more than Daimler, Volkswagen, Renault, PSA/Peugeot-Citroen, Fiat Chrysler, Ford Motor and General Motors put together.