Acer buys Gateway, sends one-two punch to Lenovo

By Suzanne Deffree, News Editor -- Electronic News, 8/27/2007

In what could be seen as a one-two punch to China-based PC maker Lenovo Ltd., Acer Inc. today announced it is acquiring Gateway Inc., a move valued at $710 million that the company claims will rank it as the world’s third largest PC company above Lenovo and will allow it to acquire Packard Bell BV, a Europe-based PC OEM that Lenovo had expressed interest in.

Taiwan-based Acer has been growing its market presence for some time, nipping at its closest competitor’s heels along the way. In Q1, Acer succeeded Lenovo for the third ranking PC spot, according to iSuppli and Gartner. But was back down to fourth, according to reports from IDC and Gartner, in Q2. The combination will create a multi-branded PC-company with more than $15 billion in revenues and shipments in excess of 20 million PC units per year, Acer said.

“Upon acquiring Gateway, we will further solidify our position as number three PC vendor globally," said J.T. Wang, Chairman of Acer, in a statement.

The move also allows Acer to acquire PB Holding Co., the parent company for Packard Bell BV, a leading European PC vendor based in France, though a previous agreement made by Gateway. Lenovo was in discussion with an independent third party on a proposed acquisition of Packard Bell earlier this month, however, wisely warned its investors that such an acquisition might not occur.  

Acer, already a significant player in Europe and Asia, will further gain a foothold in the U.S. market with the Gateway buy, making it a more formidable competitor to top ranking PC OEMs HP and Dell.

“Both Acer's and Gateway's geographical presences and product positioning are highly complementary,” Gianfranco Lanci, president of Acer, said in the statement. “We believe that our combined scale will lead to significant efficiencies. Gateway has built one of the industry's most powerful and unique brands and with this acquisition, we will have the opportunity to implement an effective multi-brand strategy and cover all the major market segments. In time, we intend to actively manage our brand portfolio and differentiate our brands to address different consumer segments.” 

Lanci continued to say that Acer is also acquiring Gateway's employees, but did not discuss the possible location closures or layoffs that often accompany mergers. However, the company did say that significant savings are expected through the increased efficiency of the combined back-office functions. Acer estimated that pre-tax synergies will be at least $150 million. The transaction is expected to be accretive to Acer's earnings per share in 2008 without synergies.

The acquisition has been unanimously approved by the boards of directors of both Gateway and Acer and is subject to standard closing conditions. Acer expects the acquisition to close by December.