Acer Inc. said it has agreed to acquire rival Gateway Inc. for about $710 million to gain a stronger presence in the United States and improve its global ranking.

The companies said the transaction would create a PC powerhouse with $15 billion in annual sales and has been approved by their boards of directors. The combined company is expected to firmly displace China's Legend Inc. as the No. 3 global supplier of personal computers.

Acer said it will pay $1.90 for each Gateway share, representing a premium of about 57 percent to Gateway stock's closing price of $1.21 on Friday, August 24. The stock had traded as high as $2.44 over the last 12 months.

Both Acer and Gateway have solid reasons for merging their operations. Gateway is struggling for survival in an intensely competitive market. In 2006, the company reported a 3 percent increase in revenue to $3.98 billion and analysts were expecting a decline in 2007 to $3.83 billion.

By: DocMemory
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