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Shares of Taiwan's Acer down sharply on plan to buy Gateway

Shares of Taiwan's Acer down sharply on plan to buy Gateway

Acer Inc.'s shares fell sharply Tuesday, one day after the Taiwanese computer maker announced its plan to acquire U.S.-based Gateway Inc. for US$710 million (euro525 million).
Acer has launched a cash tender offer for all outstanding shares of Gateway for US$1.90 a share, a 57 percent premium to the closing price of Gateway's shares on the New York Stock Exchange Friday.
The deal, expected to close by December, will push the combined company past China's Lenovo Group Ltd. to become the world's third-largest vendor of personal computers, behind Hewlett-Packard Co. and Dell Inc.
But analysts said the deal may be overpriced and Acer could be paying too much to expand its market share.
Acer shares dropped 6.9 percent Tuesday, nearly the daily downside limit of 7 percent at NT$59.20, where they had been for most of the session.
"It's a very expensive deal," said Calvin Huang, an analyst at BNP Paribas, which maintained a "buy" rating on Acer's shares. He estimates the acquisition's fair value at a 10-20 percent premium to Gateway's Friday closing price.
"Acer is now paying around US$350 million for every additional 1 percent of global market share," Huang said.
By comparison, when Lenovo Group Ltd. bought the personal computer arm of International Business Machines Corp. in 2005, it paid US$290 million for every 1 percent of additional global market share, Huang said.
There may be more selling pressure in coming days as investors wait for further details of the deal, especially the price of Gateway's planned acquisition of the parent company of Packard Bell BV, a PC maker based in the Netherlands, analysts said.
Macquarie Research said the deal is expected to use up nearly half of Acer's current cash position but provide only limited earnings contribution.
"We believe Acer has underestimated the risk it may encounter after the acquisition, due to the fast-dropping market share of Gateway and the weakening U.S. PC market," it said in a statement.


Updated : 2021-08-02 05:41 GMT+08:00