Acer plans to acquire Gateway in a deal worth $710 million that Acer says will make it the world's third-largest PC vendor.
Under terms of the agreement announced Monday, Acer will purchase all of Gateway's outstanding shares for $1.90 per share. The deal has already been approved by the boards of directors at both companies and should be completed by the end of this year, subject to government approval, Acer said in a statement.
"This is the biggest acquisition in Acer's 30 year history," said J.T. Wang, Acer's chairman, speaking at a news conference in Taipei. "After this acquisition, we are solidly number three in the global PC market," Wang said.
Acer's acquisition deal with Gateway also derails rival Lenovo Group 's plans to acquire Packard Bell BV.
Alongside the acquisition deal with Acer, Gateway unveiled plans to exercise its right of first refusal to acquire shares in Packard Bell's parent company, PB Holding, from John Hui. Hui is the founder of eMachines, which Gateway acquired in 2004, and the largest shareholder in Packard Bell.
Gateway did not disclose how much it has offered for Hui's stake in PB Holding.
Acer's efforts to overtake Lenovo will get a big boost from Gateway, which was the world's eighth largest PC vendor during 2006. Together Acer and Gateway shipped 18.6 million PCs during 2006, compared to 16.6 million PCs shipped by Lenovo.
The Gateway acquisition will have the greatest impact in the US, where Acer has been growing fast but remains in sixth place among PC vendors.
"This is definitely a good play for them from the US consumer perspective," said Bryan Ma, director of personal systems research at IDC Asia-Pacific. However, the big question is how Acer plans to integrate Gateway with its own operations, and how smoothly the integration process will go, he said.
Acer's share of the US PC market grew 164 per cent during the second quarter of 2007, compared to the same period last year. Acer shipped 888,000 PCs to US customers, giving the company a 5.2 per cent share of the market.
By comparison, Gateway was the fourth-largest PC vendor during the second quarter, shipping 965,000 PC and taking 5.6 per cent share of the US PC market. The Gateway acquisition vaults Acer into the number three spot in the US PC market, behind only HP and Dell.
"Acer is an outstanding strategic partner for Gateway," said Ed Coleman, CEO of Gateway, in a video feed at the Taipei news conference to announce the deal.
Gateway reported net income of $1.9 million for the second quarter, compared to a loss of $7.7 million one year earlier. The company said gains in its retail division during the period were offset by declining revenue in its professional and direct divisions.
However, talks are currently underway to sell off the professional division to a third party, Gateway said Monday. The company did not offer details of those discussions.
People fearing they might miss Gateway's signature black-and-white dairy cow PC boxes after the company is acquired by Acer have little reason to worry: Acer not only plans to keep the Gateway brand just the way it is, the Taiwanese company hopes to expand it.
"A strong brand such as Gateway's can be expanded overseas into other markets," said Gianfranco Lanci, president of Acer, in a video feed at the Taipei news conference to announce the deal.