Taiwan’s Acer Expands Through Gateway Purchase

Gateway Inc. announced Monday that it had agreed to be acquired by Taiwan personal computer supplier Acer Inc. for $710 million. Acer Chairman J.T. Wang said that his company will purchase Gateway shares for $1.90, representing a healthy 57% premium over the $1.21 close on Friday. The deal will be all cash. Since 1999, Gateway has lost 99% of its stock price as Dell and Hewlett-Packard grabbed increasing market share. Currently, HP is the world's largest PC maker, followed by Dell, and then Lenova. However, if the deal does go through, Acer could leap over Lenova. Aberdeen Asset Management in Singapore Christopher Wong commented on the deal: "It's eat or be eaten. Acer realizes it needs a U.S. footprint to complete its global positioning." Combined, Gateway and Acer would ship 20 million PCs, representing $15 billion in sales. As a result of mainly back-office synergies in the deal, Acer expects pretax savings of $150 million over an unspecified timeframe. Both of the companies' boards have already approved the transaction and expect the deal to close in December. Investors exhibited a lot of confidence that the deal would go through smoothly as Gateway closed up 51% to $1.81 in Monday's trading session.

Sources: Bloomberg, CNNMoney
Commentary: Acer Sees Opening As Dell's Trouble's Deepen • Multiple Milestones Ahead As Acer Buys Gateway • Battle of the Agressive Chinese Computer Brand Buyers
Stocks/ETFs to watch: GTW Competitors: DELL, HPQ ETFs: PHW
Earnings call transcripts: Gateway Inc. Q2 2007

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