Acer''s acquisition of Gateway to create world''s third largest PC maker

Taiwan''s top computer seller Acer will acquire US PC maker Gateway for $710 million that will to emerge as the world''s third largest producer of personal computers, with exceeding 20 million and sales of $15 billion.

In April, Acer had announced its intention to buy a PC maker in three to five months to improve its market share, though it did not identify its potential target, saying that it would neither be a US or nor a Taiwanese company.

Analysts say Acer will now try to block Chinese rival Lenovo from buying Packard Bell''s operations in Europe, (See: Lenovo may acquire Packard Bell) as in 2006 Gateway struck a right of first refusal deal with Packard Bell''s owner, John Hui, also known as Lap Shun Hui, the former owner of another computer maker, eMachines.

Acer and Lenovo have constantly battled it out for the third spot in PC sales and Lenovo had hoped to boost its European market position by acquiring Packard Bell.

The Hong Kong Economic Journal had reported earlier this month that Lenovo and Acer were both vying for Packard, which Hui had bought from NEC Corp. in October 2006.

Acer chairman JT Wang, said, "This 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."

The two firms said they expected the deal to result in "significant" cost savings of more than $150 million. In addition, the deal should lead to a drop in component costs, Acer and Gateway said in a join statement.

Acer will back Gateway''s intention to exercise its first refusal deal with Packard Bell in order to prevent Lenovo''s expansion plans. The deal between Acer and Gateway may now force Lenovo to either abandon its plans to buy the Dutch firm or end up having to pay more for it.