Acer to buy Gateway, become 3rd largest PC maker

Taiwan-based Acer computers announced Monday it will buy U.S. company Gateway Computers for $710 million U.S., doubling its presence in the United States and becomingthe third-largest PC maker in the world.

Acersaid the merger would create a multibranded PC company with more than $15 billion in revenue and at least 20 million PC units shipped each year.

"This will be an excellent addition to Acer's already strong positions in Europe and Asia,"J.T. Wang, Acer's chairman, said in a statement. "Upon acquiring Gateway, we will further solidify our position as No. 3 PC vendor globally."

In the second quarter, Acer was the world's fourth-largest PC maker behind U.S.-based Hewlett-Packard, No. 2 Dell, and third-ranked Lenovo Group Ltd. of China, according to research company Gartner Inc.

Gateway, based in Irvine, Calif.,had the third-largest share of the PC market in the United States, but was well behind Dell and Hewlett-Packard.

Under terms of the agreement, Acer will purchase all outstanding shares of Gateway for $1.90 a share —57 per cent above Gateway's Friday closing price of $1.21. In 1999, Gateway traded at a high of $81.50.

Thedeal is expected to close by December 2007.

The acquisition still leaves Acer well behind market leaders Hewlett-Packard and Dell, but ahead of Lenovo, its rival PC maker from China.

The move could scuttle Lenovo's plans, announced earlier in August, to purchase French PC maker Packard Bell BV.

Gateway had earlier announced it intends to exercise its right of first refusal to acquire shares of PB Holding Co., the parent company of Packard Bell BV, from its largest shareholder.

Those rights remain with the combined Acer-Gateway company, so Acer is now in a position to block the sale of Packard Bell to Lenovo.