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Thursday, August 30, 2007

Repurchase of Gateway

Acer is criticized more and more for its repurchase of Gateway, announced two days ago (cf "Acer repurchases Gateway for 710 million dollars"). The P.D.G of the firm engaged its responsibility besides by affirming that if the transaction did not succeed, it would give its resignation.
Reasons of dissatisfaction
Criticisms relate first of all to the amount of the repurchase considered to be excessive. The sum of 710 million dollars is far from achieving the unanimity. Acer announced to buy the actions of Gateway for 1,90 $ the action, that is to say 57% of more than their value with the fence of the New York Stock last Friday Exchange. The firm is also a great success on the new continent with sales which grew of more than 100% its last years. Not only this repurchase thus seems useless, but it leaves the impression that Acer was made have.
Moreover, much fear that Acer had "eyes larger than its belly". By repurchasing Gateway, Acer also inherits eMachines and the European division of Packard Bell BV. It is thus much of teams and of resources to be managed of only one blow and it only Acer is not known as was left there.
Lastly, the investors make gray mine, because since the advertisement, the action of Acer lost 6,9% per day to fall to 1,67 $ to Taiwan Stock Exchange.
While waiting, Acer reaffirms its ambition to double its shares of market in the United States and to reach an annual sales turnover of 15 billion dollars for a volume of sale of 20 million machines. The company also hopes to reduce its costs by obtaining better prices on the material integrated in its models because of a greater number of produced machines.
For information, will know that the repurchase is not yet final, but must be approved by the various legal authorities and the shareholders.

News Inside News:

Acer Repurchase of Gateway-
Whereas one believed it interested by the repurchase of Packard Bell, it is ultimately American Gateway whom Acer has just acquired for the moderate amount of 710 million dollars. The manufacturer should propose 1,90 dollar for each Gateway title, that is to say a premium of 7%.
This operation should make it possible to the new giant to double his shares of market in the United States and to reach an annual sales turnover of 15 billion dollars for a volume of sale of 20 million machines. This repurchase consolidates the place of Acer as a third world manufacturer of computers, behind Dell and Hewlett-Packard, but in front of Lenovo…
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 the boards of directors of both Gateway and Acer and is subject to standard closing conditions, including approval under Hart Scott Rodino, Exon Florio and similar laws outside the U.S. The acquisition is expected to close by December 2007.
Gateway earlier announced that it intends to exercise its Right of First Refusal to acquire from Lap Shun (John) Hui, all of the shares of PB Holding Company,, the parent company for Packard Bell BV - a leading European PC vendor based in France. In addition, Gateway is currently in discussions with a third party with regards to a sale of its U.S. based Professional business.
"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. Upon acquiring Gateway, we will further solidify our position as number three PC vendor globally."
Gianfranco Lanci, President of Acer, added, "Both Acer's and Gateway's geographical presences and product positioning are highly complementary. 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. We are also acquiring a world-class team and Gateway's employees will be critical to our combined success."
"We believe our complementary geographical and product mixes, and our mutual focus on the consumer market makes Acer an outstanding partner for Gateway." explained Ed Coleman, CEO of Gateway. "Joining with Acer will enable us to bring even more value to the consumer segments we serve and capitalize on Acer's highly regarded supply chain operations and global reach to expand the scope of the Gateway and eMachines brands around the world. Acer has made impressive strides in the global PC market and the board and I welcome this merger."
The combination of Acer and Gateway is expected to result in significant revenue and cost synergies. The considerable increase in scale will result in reductions in per unit procurement and component costs for both companies. This combination also creates a real opportunity for the cross-selling of product portfolios by leveraging the customer relationships of both Acer and Gateway. Significant savings are also expected through the increased efficiency of the combined back-office functions. The pre-tax synergies are expected to be at least $150 million. In addition, this transaction is expected to be accretive to Acer's earnings per share in 2008 without synergies.
Citigroup Global Markets Inc. acted as exclusive financial advisor to Acer; Goldman, Sachs & Co. served as exclusive financial advisor to Gateway.

About Acer-
Acer ranks as the world's No. 4 branded PC vendor, designing easy, dependable IT solutions that empower people to reach their goals and enhance their lives. Since spinning-off its manufacturing operation, Acer has focused on globally marketing its brand-name products: mobile and desktop PCs, servers and storage, LCD monitors and high-definition TVs, projectors, and handheld/navigational devices. Acer's unique Channel Business Model is instrumental to the company's continued success. The model encourages partners and suppliers to collaborate in a winning formula of supply-chain management, allowing Acer to provide customers with fresh technologies, competitive pricing, and quality service. Established in 1976, Acer Inc. employs 5,300 people supporting dealers and distributors in more than 100 countries. Revenues in 2006 reached US$11.32 billion.

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