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Taiwan's Acer Buys Gateway For $710M

Acquisition pushes Acer past China's Lenovo as third-largest PC vendor, strengthening U.S. presence.

TAIPEI, Taiwan (AP) — Acer Inc. plans to acquire U.S. computer maker Gateway Inc. for $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 in a deal expected to close by December, pending regulatory approvals in Taiwan and the U.S.
 
The offer price amounts to a premium of 57 percent to Gateway's Friday closing price of $1.21. Gateway traded at $81.50 in 1999.
 
The acquisition has been unanimously approved by the boards of directors of both Gateway and Acer and is subject to standard closing conditions, it said.
 
The deal will create a multi-branded computer company with over $15 billion in revenues and shipments in excess of 20 million units per year, Acer said in the 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 statement.
 
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. Irvine, California-based 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, told Dow Jones Newswires that 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.
 
Gateway was founded in 1985 in Sioux City, Iowa, and relocated across the South Dakota border five years later. The company moved its headquarters to Irvine, Calif., in 1998.
 
The North Sioux City, S.D., plant, which at its peak in the late 1990s employed nearly 6,000 people, was Gateway's last manufacturing site. The company announced plans last year to build a new manufacturing facility in Nashville.
 
In May 2006, Gateway employed a total of about 1,800 people in South Dakota and at its headquarters in California with about 850 of those positions based in North Sioux City.
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