Taiwan's Acer Inc. plans to acquire Gateway for US$710 million

TAIPEI, Taiwan (AP) - Acer Inc. plans to acquire U.S. computer maker Gateway Inc. for US$710 million in a deal that will push the Taiwanese company past China's Lenovo Group as the world's third largest vendor of personal computers. Acer said Monday it is offering to buy Gateway for $1.90 per share - representing a premium of 57 per cent to Gateway's Friday closing price of $1.21, but only two per cent of Gateway's high of US$82.50 in late 1999.

Shares in Gateway increased 59 cents, or 49 per cent, to $1.80 in trading Monday.

With the acquisition, Acer will absorb a company founded in 1985 in an Iowa farmhouse and known for packaging computers in cow-spotted boxes. Now based in Irvine, Calif., Gateway struggled in recent years amid fierce competition and had difficulty selling its products over the Internet and the phone.

The deal will create a multi-branded computer company with more than US$15 billion in revenues and shipments in excess of 20 million units per year, Acer said in a statement.

"This strategic transaction is an important milestone in Acer's long history," said J.T. Wang, Acer's chairman, in the statement. "This will be an excellent addition to Acer's already strong positions in Europe and Asia."

Acer president Gianfranco Lanci said the acquisition will allow Acer to implement an "effective multi-brand strategy and cover all the major market segments."

The takeover will result in reductions in per unit procurement and component costs, and also create an opportunity for the cross-selling of product portfolios, he added.

Ed Coleman, chief executive of Gateway, welcomed the buyout.

"Joining with Acer will enable us to bring even more value to the consumer segments we serve and capitalize on Acer's highly regarded supply chain operations and global reach," he said.

In the second quarter, Acer was the world's fourth-largest PC maker behind U.S.-based Hewlett- Packard, No. 2 Dell, and third-ranked Lenovo Group Ltd. of China, according to research company Gartner Inc.

Gateway is the third-largest PC vendor in the U.S. by market share after Hewlett-Packard Co. and Dell Inc.

Bryan Ma, an analyst at U.S. market research firm IDC, said Acer's acquisition of Gateway is expected help the Taiwan company's relatively weak presence in the U.S.

"Acer ranked sixth in the U.S. market, while Gateway ranked third as of the second quarter. Combined, they are expected to double their shipments," he said.

Citigroup Inc. is the financial adviser for Acer, while Goldman Sachs Group Inc. is acting as the financial adviser for Gateway.

The Canadian Press, 2007