Acer to leapfrog Lenovo with Gateway deal
By Kathrin Hille in Taipei and Kevin Allison in San Francisco
Updated: 8:12 p.m. CT Aug 27, 2007
Acer of Taiwan agreed to buy Gateway of the US for $710m on Monday. A deal would put it ahead of Lenovo, its Chinese rival, as the world's third-largest personal computer maker.
The transaction, approved by the boards of both companies, will strengthen Acer's position in the US retail market. It will also give it control of Packard Bell in Europe, a PC vendor, only weeks after Lenovo announced it was in exclusive talks to acquire the company.
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"The company that loses the most from this is Lenovo," said JP Gownder, a PC analyst at Forrester Research. "Acer is saying [it's] going to be a world player. That is a huge stake in the ground."
Gateway's shares surged nearly 50 per cent to $1.80 on news of the proposed deal, which valued the company at $1.90 a share â a 57 per cent premium to Friday's closing price for Gateway shares.
Acer was able to snatch Packard Bell out of Lenovo's hands because Gateway has a say over any sale of the PC vendor under a contract with John Hui, a big shareholder in both companies.
For Gateway shareholders, the Acer deal represents a way out after years of waiting for a turnround at the computer maker, which swung into profit last quarter in spite of falling sales.
Gateway's shares had fallen 80 per cent since 2004 after competition from Hewlett-Packard and Dell and slow US consumer sales left it a distant third among US computer makers.
"While much diminished in the US market, Gateway still has a foothold in certain retail outlets and Acer hasn't been able to crack into that," Mr Gownder said.
Acer and Lenovo have been fighting for third place in the global PC industry behind Hewlett-Packard and Dell.
On completion of the deal, which is expected in December at the latest, the combined companies are expected to have revenues in excess of $15bn.
Annual PC shipments would surpass 20m units, said Gianfranco Lanci, Acer president.
Acer and Gateway combined command 8.8 per cent of the global PC market by unit shipments, followed by Lenovo with 7.9 per cent, according to Gartner, the market research company. Acer alone held 7.1 per cent market share.
Gateway was advised by Goldman Sachs.
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