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Acer Elbows Into Third Place |
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Written by Adam Gosling
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Tuesday, 28 August 2007 |
Tear-away Taiwanese tiger, Acer Inc., has stepped up its attack on
the US market with a plan to acquire the popular but sedentary Gateway
computer business in a cash offer of around US$710 million. In turn,
Gateway has announced it will acquire the parent company of European PC
business Packard Bell - further extending its market share.
Gobbling Gateway, which is the fourth largest PC company in the US, will push
Acer into third spot for worldwide market shares behind Hewlett Packard and Dell
and, importantly, in front of rival Chinese maker Lenovo, which gained the number three spot by
acquiring IBM's PC division back in 2004.
If the deal goes ahead Acer will become a US$15 billion a year
business selling more than 20 million PCs per year. But it will be its
beach head in the United States market, which Acer has vowed to
win-over that is the most important element of this deal for the
company.
"This strategic transaction is an important milestone in Acer's long history"
said J.T. Wang, Chairman of Acer. "The acquisition of Gateway and its strong
brand immediately completes Acer's global footprint, by strengthening our US
presence. This will be an excellent addition to Acer's already strong positions
in Europe and Asia."
Acer President Gianfranco Lanci points out the deal is a sweet one because the
two company's "geographical presences and product positioning are highly
complementary". In fact the company intends to keep the
eMachines and Gateway
brands (presumably with the cow pattern packaging) to help it
strengthen its US presence. That presence is already on the move
however, Acer managed to ship 888,000 PCs in the US during the second
quarter this year, an amazing 163.8
percent increase from the same quarter a year ago.
In the long run the plan is to develop a multi-brand strategy that
will cover differentiated market segments, said Acer. " In time, we
intend to actively manage our brand portfolio and differentiate our
brands to address different consumer segments. We are also acquiring a
world-class team and Gateway's employees will be critical to our
combined success," said Langi.
Apart from brand and reach, the increased size will also result
in significant cost reductions. Per unit procurement and component
costs for both companies and increased efficiency of the combined
back-office functions is expected to deliver at least US$150 million in
savings.
From an earlier deal between Gateway and Packard Bell the US company
had been given the Right of First Refusal to acquire Packard Bell from
John Hui who had sold the eMachines business to Gateway in the first
place. When Lenovo expressed an interest in Packard Bell , Gateway was able to move
in and buy the French parent company, thus cutting Lenovo off at the
pass after the Chinese vendor had expressed an interest in Packard
Bell.
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 both Boards of
Directors and is expected to close by
December 2007.
Acer made the cash offer in order to seal a deal "as soon as possible,"
but it needs to gain a 90 percent acceptance rate for outstanding
shares. Acer says it already has an agreement
in principle with former Gateway CEO Theodore "Ted" Waitt, who holds a
12 percent stake and another major shareholder group has indicated they
will possibly support the deal. If it can't get the shares at US$1.90
Acer will need to buy at least hald the company and then put it to a
shareholder vote.
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