Taiwanese based PC vendor Acer has announced it has entered an agreement to buy US-based Gateway Inc. The deal will see Acer offer to purchase all outstanding shares at $US1.90 per share, costing approximately $US710million. The deal has already received full approval by the boards of both companies but is subject to standard closing conditions.

However, in this complex deal, Gateway earlier announced it intends to exercise its First Right of Refusal to acquire all shares of PC vendor Packard Bell BV, one of France’s leading PC vendors.

The combined operations will have an annual revenue in excess of $US15billion with shipments of more than 20million PCs a year.

"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." 

However, questions remain over how many of Gateway’s employees will be retained in the new operation. In a statement, Acer described the benefit of the combined operation as having “significant revenue and cost synergies” with the increase scale of Acer’s operation to “result in reductions in per unit procurement and component costs for both companies”.

Although neither company has made specific mention of staff cuts, it remains to be seen if statements such as “significant savings are also expected through the increased efficiency of the combined back-office functions” result in staffing cutbacks in those areas. Few mergers of this size in the past have resulted in no job losses.

Acer is hopeful of cross-selling products and leveraging the customer relationships of both companies. According to the statement made by Acer, pre-tax “synergies” are expected to be at least US$150million.

"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."

Whether or not the employees of both companies feel likewise will be seen in the coming months.