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Gateway shareholders express their outrage over the $710 million USD Acer acquisition

Acer made a surprise move in late August when it announced its intentions to purchase U.S.-based Gateway, Inc. The deal was valued at $710 million USD and was crucial in helping Acer get a stranglehold on the U.S. market. Gateway is currently the fourth largest PC manufacturer in the U.S., while Acer is the third largest PC manufacturer in the world.

"The acquisition of Gateway and its strong brand immediately completes Acer's global footprint, by strengthening our US presence," said Acer chairman J.T. Wang at the time of the announcement.

"Acer has made impressive strides in the global PC market and the board and I welcome this merger," added Gateway CEO Ed Coleman.

All is not roses, however, when it comes to the merger. Shareholders in two separate lawsuits are claiming that Gateway was worth well more than the $710 million USD price tag that was agreed upon. The shareholders note that Gateway had a fiduciary responsibility to its shareholders and was not putting its shareholders interests in mind when it agreed to the acquisition.

"The Company’s directors breached their fiduciary duties to stockholders by approving the Merger Agreement and the transactions contemplated thereby, including but not limited to the Offer, and claims that these transactions are both unfair and coercive to the public stockholders in a sale of the Company," the lawsuit claims.

The lawsuit goes even further to indicate that "The Company’s directors breached their fiduciary duties by failing to include certain information in the Schedule 14D-9, which purportedly denies the stockholders a fully informed voluntary choice whether to approve the Merger Agreement or seek appraisal."

It is not known what price shareholders would have been content with concerning the Gateway purchase, but John Hui offered just $450 million USD for Gateway's retail division in August 2006. Gateway rejected the offer.

Wang Jen-tang, Acer's chairman and CEO, has even noted that its investors and some market analysts indicated that the $710 million price tag may have been too much. "Regarding the criticism that the price is too high, I think whether a price is high depends on whether the buyer will in the end be able to realize synergies," said Jen-tang to the Financial Times. "If he is able to do that, then it is not high. If he can't realize the synergies, then it's a very high price."

Shareholders may also be smarting over Gateway's priority position when it comes to Packard Bell. Gateway has the right of first refusal (ROFR) for complete control of PB Holding Company, -- thus gaining complete control of Packard Bell. Gateway acquired the ROFR in June 2006 from Hui.

Jen-tang plans to exercise the right and is already discussing Acer's plans for Packard Bell.

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RE: Gateway still exists?
By michaelheath on 9/13/2007 3:14:24 PM , Rating: 2
Well, for those who don't remember, Gateway used to have store locations up until about 5 years ago when they decided to submerge into the depths of exclusive online sales only.

The fact that Gateway is still 4th in global sales shouldn't be surprising, seeing as how I didn't even know Acer was the 3rd largest manufacturer (I've seen one person using an Acer laptop in the past year here in the U.S., and the young lady who owned it purchased it in Italy), and Apple is 5th (I see Apple laptops all over the place).

While the eMachines sales and budget Gateway brand machines is probably their bread & butter income, Gateway as a company has had a wide variety machines for sale, including gaming machines. Maximum PC and [H]ardOCP have both reviewed the FX gaming series, and [H] in particular was somewhat fond of their tech support.

I guess I'm just saying, "Just because you haven't seen them all over the place doesn't mean they fell off the face of the earth and they're no good, for it seems that, apparently, quite the opposite is true."

With that in mind, I am rather surprised that Acer and Gateway directors both thought that the company was only worth $710 mil. Being the 4th largest computer supplier is no small feat, unless the company has been hemorrhaging profits all along to get to that figure, but I don't think that's true since their past few quarterly earnings seem to show profit.

RE: Gateway still exists?
By 1078feba on 9/13/2007 4:45:36 PM , Rating: 3
I recall posting along similar lines when this site posted the original article about the proposed buyout a few weeks back. I was politely told that I was wrong, and that Gateway wasn't worth anymore than what Acer was paying for it.

Maybe all that money spent on my International Finance/German degree wasn't wasted after all...:)

RE: Gateway still exists?
By MADAOO7 on 9/13/2007 8:52:15 PM , Rating: 2
ateway is still 4th in global sales shouldn't be surprising

What's surprising is you didn't read the article correctly. Gateway is 4th in the US , not globally. Acer is a much larger company with an absolutely massive global presence, especially in Asia and Europe. I say this as a proud American, but Americans commonly forget we aren't the only country in the world. We are but just a small part of the larger global economy. Just because Acer isn't a household name in the US (although it has always been in mine.... thank you $300 4x CD-R drive) doesn't mean it doesn't exist everywhere else.

RE: Gateway still exists?
By mindless1 on 9/15/2007 3:48:01 AM , Rating: 2
Yes, Acer has a far larger global market, however it does not diminish Gateway's name/value. I own an Acer laptop and yet, for the small overhead Gateway charges, have not found Gateway systems to be substandard in any way.

I think Gateway's primary problem was predicting the market, that people don't value a "country store" as much as low price and service be damned (until the customer whines about lack of service later, LOL) (at least not in this century).

Let's be frank, Gateway was targeting first-generation PC owners, your parents or grandparents (depending on how old you are), and they are a dwindiling population. Today's young adult, first PC purchase customers are looking for lower price,, eliminating the middleman, more than supposed GW naamesake or support.

"Game reviewers fought each other to write the most glowing coverage possible for the powerhouse Sony, MS systems. Reviewers flipped coins to see who would review the Nintendo Wii. The losers got stuck with the job." -- Andy Marken
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