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Why AutoNavi Holdings Ltd. Skyrocketed

By Brian D. Pacampara, CFA – Feb 10, 2014 at 12:32PM

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Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of AutoNavi Holdings (NASDAQ: AMAP) soared 25% today after Chinese e-commerce giant Alibaba offered to buy the 72% of the digital mapping technologist it doesn't already own for about $1.6 billion

So what: Alibaba's offer values AutoNavi at $21 per share and represents a premium of 27% to its closing price on Friday. Alibaba is making the move to bolster its mobile offerings amid intensifying competition from the likes of Baidu (BIDU 4.72%) Judging by the jump in AutoNavi's stock price, Wall Street expects the cash deal to be accepted.

Now what: AutoNavi intends to form a committee of independent directors to consider the offer. "We believe that Alibaba is uniquely positioned to offer superior value to AutoNavi's shareholders based on our complementary, rather than competitive, business strategies and the potential synergies we can achieve from a full combination," Alibaba Executive Vice Chairman Joseph Tsai wrote in the proposal. So while AutoNavi is likely all popped out at this point, Alibaba -- which is expected to go public this year -- and its rapidly increasing scale advantages are certainly worth keeping an eye on. 

Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Baidu. The Motley Fool owns shares of Baidu. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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