Acer plans to buy Gateway in a deal worth $710m, which will make Taiwan's computer giant the third-largest computer supplier in the world.

Under the agreement, Acer has made a cash offer to buy all outstanding shares of Gateway for $1.90 per share. Acer said the purchase will create a combined company worth $15bn in revenues, shipping over 20 million computers every year.

The acquisition has been approved by the board of directors at both companies and is expected to close by December 2007. Gateway said it is currently in talks with a third party about selling its ailing Professional business.

Acer said the takeover will push it to the number three spot in worldwide PC shipments. The company is just behind Lenovo in shipments — but still many millions of units behind market leaders HP and Dell according to market analyst firm IDC (http://www.idc.com/getdoc.jsp?containerId=prUS20789807).

"The acquisition of Gateway and its strong brand immediately completes Acer's global footprint, by strengthening our US presence," said Acer chairman, JT Wang in a statement. "This will be an excellent addition to Acer's already strong positions in Europe and Asia."

According to IDC's second quarter numbers, Gateway is the third largest PC vendor in the US, holding 5.6 per cent of the market state-side. Gateway reported net income of $1.9m for the second quarter, compared to a $7.7m loss a year earlier. Acer's own renewed efforts in the US market have put them on the radar with 5.2 per cent of the US market — up 163.8 per cent from last year.

Acer's bid for Gateway will also likely thwart Lenovo's plans (http://www.theregister.co.uk/2007/08/08/lenovo_to_buy_packard_bell/) to acquire Packard Bell. Last year, Gateway signed an agreement with John Hui, owner of Packard Bell, that gave Gateway the right to refuse an offer should Hui decide to sell PB Holding, the parent company of Packard Bell. And that's exactly the muscle they intend to flex.

Riding along the acquisition announcement, Gateway announced it will exercise its right of first refusal. This means if Lenovo wants to sit down at the negotiating table with Packard, they have to get Gateway's permission first.

Acer expects the considerable increase in scale of the combined companies to result in reduced component costs. Pre-tax "synergies" will be at least $150m, according to Acer.

A $710m price tag shows that for Gateway, staving off ogling eyes until now wasn't worth the wait. In 1997, Gateway founder Ted Waitt was reportedly prepared to sell the company for $7bn to Compaq (http://www.time.com/time/magazine/article/0,9171,986352-1,00.html) before having a last minute change of heart. ®

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