Wednesday, August 29, 2007

Acer Set to Acquire Gateway

Acer Inc., currently the fourth largest maker of personal computers in the world, on Monday announced that it had entered into a definitive agreement to acquire Gateway, the fourth largest PC company in the
U.S. The combination will create a multi-branded PC-company with over $15 billion in revenues and shipments in excess of 20 million PC units per year.
Under the terms of the agreement, Acer will commence a cash tender offer to purchase all the outstanding shares of Gateway for $1.90 per share, which represents total equity value consideration of approximately $710 million. The acquisition has been unanimously approved by the boards of directors of both Gateway and Acer and is expected to close by December 2007.
In Q2 2007 Acer commanded 7.2% of the global PC market, whereas Gateway had approximately 1.57% market share, according to numbers by Gartner agency. The combined company will be able to claim over 8% of the market, which will make it the world’s No. 3 supplier of personal computers.
There is a global trend towards enlargement of personal computer makers. In the recent years Gateway acquired E-Machines, HP bought Compaq, Lenovo took over IBM’s PC division and aims to buy Packard Bell. Being an influential maker of PCs, it is natural for Acer to target smaller suppliers of computers to improve its own business and obtain new markets for its devices.
“This strategic transaction is an important milestone in Acer’s long history. The acquisition of Gateway and its strong brand immediately completes Acer’s global footprint, by strengthening our U.S. presence. This will be an excellent addition to Acer’s already strong positions in Europe and Asia. Upon acquiring Gateway, we will further solidify our position as number three PC vendor globally,” said J.T. Wang, chairman of Acer.
The combination of Acer and Gateway is expected to result in significant revenue and cost synergies. The considerable increase in scale will result in reductions in per unit procurement and component costs for both companies. This combination also creates a real opportunity for the cross-selling of product portfolios by leveraging the customer relationships of both Acer and Gateway. Significant savings are also expected through the increased efficiency of the combined back-office functions. The pre-tax synergies are expected to be at least $150 million. In addition, this transaction is expected to be accretive to Acer’s earnings per share in 2008 without synergies.
Gateway earlier announced that it intends to exercise its Right of First Refusal to acquire from Lap Shun (John) Hui, all of the shares of PB Holding Company, the parent company for Packard Bell – a leading European PC vendor based in France. In addition, Gateway is currently in discussions with a third party with regards to a sale of its U.S. based Professional business.

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