Amid mounting criticism of Acer Inc.’s plans to buy Gateway Inc., the chairman and CEO of Acer has vowed to step down if his company’s bid to join with Gateway fails.
“The merger will definitely succeed. If it doesn’t … I will resign,” the Chinese-language newspaper Economic Daily News quoted Acer Chairman and CEO J.T. Wang as saying in an interview published today. Acer spokesman Henry Wang confirmed the statement.
The declaration came amid growing criticism of the acquisition, which the companies’ boards have approved. Industry watchers and stock market analysts have called the $710 million purchase too expensive, saying Acer should have forgone the deal and continued to grow its U.S. business from the ground up. The company’s U.S. sales have grown at more 100 per cent for the past few years, according to Acer.
Other analysts fear Acer may have trouble bringing Gateway into its fold because it may ultimately become a three-in-one deal, including Gateway subsidiary eMachines and Europe’s Packard Bell BV. That may be too many companies to absorb in one go, analysts say.
“The premium paid to Gateway may be too high, and the execution risk of multiple-brand strategy is clearly the key here,” said Vincent Chen, a PC industry analyst at CLSA Asia-Pacific Markets in Taipei.
Taiwanese investors don’t like the deal, either. Acer’s share price has fallen by its daily market limit, 6.9 per cent, for each of the past two days, closing at $1.67 today on the Taiwan Stock Exchange.
Acer agreed on Monday to buy Gateway in an all-cash deal for $1.90 per share, a 57 per cent premium over Gateway’s closing share price of $1.21 on the New York Stock Exchange on Friday.
Acer said the deal will transform it into a much larger company with $15 billion per year in revenue and shipments of nearly 20 million PCs, giving it a solid base in the important U.S. market. The company plans to market multiple PC brands worldwide after the acquisition, thereby increasing sales. The deal will also help it cut costs. Size is vital to gaining volume discounts from parts suppliers, Acer said.
The purchase still needs regulatory and shareholder approval.
