Gateway, the fourth-biggest PC maker in the US, is itself being bought by Taiwanese rival Acer for $710m. Before that deal was signed, Gateway claimed to have first refusal on the sale of Packard Bell.

Lenovo Group, the top PC maker in China, was also pursuing Packard Bell, in a bid to push its brand name further in Europe. In early August, Lenovo said it was negotiating and undertaking certain necessary enquiries with third parties and government bodies in preparation for a definitive agreement to buy Packard Bell. A deal seemed imminent.

But thanks to its purchase of Gateway, Acer got there first.

Gateway acquired the right of first refusal as part of a June 2006 agreement with Lap Shun (John) Hui that waived non-compete clauses as part of his purchase of France-based Packard Bell. Hui sold eMachines, the company he founded, to Gateway in March 2004.

When Acer announced it would buy Gateway in late August, Acer president Gianfranco Lanci said the company would continue its acquisition of Gateway even if Gateway was unsuccessful in buying Packard Bell. If the deal went through, Acer said it would fund the acquisition.

Money-losing Gateway had struggled in recent years against its stronger US rivals Hewlett-Packard and Dell. And less than 10% of Gateway’s sales came from outside the US. Still, Gateway had grown its sales somewhat during the past three years to almost $4bn in 2006.

Lenovo is, of course, the company that bought IBM’s PC business for $1.25bn two years ago. It initially faltered to absorb IBM’s sprawling business but seemed to be on the right track for its latest quarter, when it reported income up from $5m a year ago to $76m and sales 12.9% higher to $3.9bn.

Gateway said it would buy all Packard Bell shares from Lap Shun (John) Hui and Clifford Holdings, an entity controlled by Hui who owns a 75% interest in Packard Bell.

Gateway and Hui and Clifford said they would collaborate with the Works Councils in France and the Netherlands to get antitrust and other regulatory approvals to close the deal later this year or in the first quarter of 2008.

Our View

Presumably, Acer will add Packard Bell to its stable of brands, which Acer chief executive JT Wang said, at the time of the Gateway deal, would now include Acer, eMachines and Gateway – the first time Acer had carried multiple brands.

While Packard Bell has strong brand recognition in Europe and likewise Gateway does in the US, it may be difficult, at least at first, for Acer to manage its four brand names around the world.

For sure, the Packard Bell deal gives Acer a strong lead against Lenovo in the European market where both companies are striving for market share.