Acer snaps up Gateway for $710 million

PC maker Acer has announced plans to buy US rival firm Gateway for $710 million (£353 million).

The move will make the Taiwanese vendor the third largest in the world, capturing the acquired company's US market to complement its own, main European market and selling over 20 million PCs combined annually.

At the same time, Gateway exercised its first right to refusal over another rival, Lenovo's bid to extend its retail opportunities in Europe by buying Packard Bell. The right comes as part of an agreement signed last year with Packard Bell's largest shareholder, John Hui should he decide to enter into final agreement with another party to sell Packard Bell's holding company, SARL.

And the agreement between Hui and Gateway comes after Gateway acquired a eMachines in 2004, which was a PC vendor Hui founded. He signed the first refusal clause with Gateway in exchange for waving parts of the non-compete terms agreed when eMachines was first sold.

Lenovo announced it had begun talks to acquire Packard Bell at the beginning of last month. But the activities over the bank holiday weekend have effectively killed off the Chinese number one PC maker's bid to grow by acquisition in the European region. Gateway yesterday confirmed it had entered into its own talks with the vendor to buy it.

It also means, by default, that Acer could have not only Gateway's brand and operations to integrate, but Packard Bell's too.

Clive Longbottom, service director for analyst Quocirca said Acer's acquisition of Gateway left question marks over the two companies' potential cultural fit, given the fact that the first was primarily known for its business-focused brands and Gateway who has famously concentrated on the consumer market, pulling out of Europe some years ago to concentrate on its US brand.

"Packard Bell has more business capabilities than Gateway, so I can see a much better fit here," said Longbottom. "Acer could well have seen buying Gateway as a way to stop its business systems rival, Lenovo gaining market share through acquiring Packard Bell."

In a news conference held yesterday, Gianfranco Lanci, Acer's president, indicated that the company planned to keep the Gateway brand going forward. Longbottom said this would enable Acer to maintain and grow its enterprise-focused business in Asia-Pacific and European regions, while allowing it to grow consumer and small-to-medium sized business products in the US.

"This strategic transaction is an important milestone in Acer's long history" said Acer's chairman J.T. Wang at the press conference. "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. Upon acquiring Gateway, we will further solidify our position as number three PC vendor globally."

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