Gateway up on Acer buyout; Stelco jumps on U.S. Steel merger; First National, Carolina a 'good match'

By Sheri Kasprzak

New York, Aug. 27 - Two major mergers grabbed headlines on Monday.

News Monday that Taiwanese personal computer vendor Acer, Inc. will acquire Gateway Inc. for $710 million sent shares of Gateway up.

The move, according to sell-side traders, is good for both Acer and Gateway.

In other merger news, United States Steel Corp. said it plans to buy Canada's Stelco, Inc.

U.S. Steel plans to buy Stelco in a deal valued at C$1.1 billion at C$38.50 each, a 43% premium to the company's C$26.93 closing stock price on Friday.

The news sent shares of Stelco up while U.S. Steel's stock edged up and down slightly throughout the day.

Elsewhere in merger news, First National Bancshares Inc. signed an agreement to buy Carolina National Corp. in a $59.3 million deal.

Gateway stock up

Moving back to the Gateway acquisition by Acer, sell-side traders and an analyst said Monday that the move was extremely smart for Gateway and beneficial to Acer as well.

"This is good news for Gateway," said one sell-side trader. "They sold at a premium and, from everything I've seen, this really won't hurt the brand. It's a win for them, it's a win for Acer."

"The premium they sold at was substantial," said another sell-side trader. "They were at around $1.20 and sold at $1.90. GTW has been a struggling name for quite some time so this sale was a good move."

One analyst said Monday that the move is smart for Acer.

"It means good things for Acer," he said. "Acer has now taken the number-three spot among the world's computer vendors and that's a great place to be. I think it really does say something for their plans that they were willing to pay so much for the stock. They are serious about building a major stake as a PC vendor."

The acquisition, the analyst says, knocks China's Lenovo Group out of the top three spot.

Acer plans to pay $710 million. The $1.90 per share price is a 57% premium to Gateway's $1.21 closing stock price on Friday.

Shares of Gateway took off, gaining almost 50%, just after the opening bell on Monday. By 9:33 a.m. ET, the stock had gained 50.41%, or 60 cents. By 1 p.m., the stock was up 49.59%, or 60 cents. The stock went on to close with a gain of 50.41%, or 61 cents, finishing at $1.82 (NYSE: GTW). After hours, the stock lost 2 cents.

Meanwhile, shares of Acer fell 1.85%, or TWD1.20, to end the day at TWD63.60 (Taiwan: 2353). The volume of Acer shares traded Monday fell by more than half with just 5,099,757 shares traded compared with the average 11,062,700 shares.

"This strategic transaction is an important milestone in Acer's long history," said J.T. Wang, Acer's chairman in a statement.

"The acquisition of Gateway and its strong brand immediately completes Acer's global footprint, by strengthening our U.S. presence. This will be an excellent addition to Acer's already strong position in Europe and Asia. Upon acquiring Gateway, we will further solidify our position as number-three PC vendor globally."

"We believe our complementary geographical and product mixes, and our mutual focus on the consumer market makes Acer an outstanding partner for Gateway," said Ed Coleman, Gateway's chief executive officer, in a news release.

"Joining with Acer will enable us to bring even more value to the consumer segments we serve and capitalize on Acer's highly regarded supply chain operations and global reach to expand the scope of the Gateway and eMachine brands around the world. Acer has made impressive strides in the global PC market and the board and I welcome this merger."

Gateway's first right of refusal

Gateway, currently the fourth-largest PC vendor in the United States, also said Monday it will exercise its right of first refusal to buy all of the shares of PB Holding Co., Sarl, the parent company of Packard Bell BV, from Lap Shun Hui.

In addition to the possible purchase of Packard Bell, Gateway is also in talks to sell its professional business to a third party. The professional business is focused on education, government and business customers.

"The acquisition of Packard Bell BV and the sale of the professional business, if completed, are consistent with Gateway's strategy to focus resources on growing its overall consumer business, both in the U.S. and internationally," said a statement released Monday by Gateway.

U.S. Steel to buy Stelco

Elsewhere, U.S. Steel said it plans to buy Stelco in a transaction valued at $1.1 billion.

U.S. Steel said late Sunday it plans to buy Stelco's shares at C$38.50 each, a 43% premium over the company's C$26.93 closing stock price on Friday.

"Great news for Stelco," said one Canadian analyst. "They've really needed something like this. They emerged from bankruptcy last year and they've managed to secure this transaction, which will be incredibly good for them."

When asked about speculation that U.S. Steel is just trying to ward off potential takeovers, the Canadian analyst said, though he does not follow U.S. Steel, he does believe that is part of the equation.

"I would say the move is probably more beneficial to Stelco than it is to U.S. Steel," he noted. "But this is a strong move on U.S. Steel's part to ward off potential takeover bids."

Stelco's stock did respond well, gaining 39.73%, or C$10.70, to end the session at C$37.63 (Toronto: STE).

U.S. Steel's stock fell by 38 cents, or 0.41%, to settle at $93.01 (NYSE: X). In after-hours trading, the stock gained 60 cents.

First National buy a 'good match'

A sell-side trader said Monday that First National's purchase of Carolina National is a "good match."

"They're in a competitive market, regionally," he said. "Obviously, this is great news for CNCP [Carolina National]. Ultimately it is for First National too. It expands their presence in a very competitive banking market."

The move sent Carolina National's stock up 43.38%, or $5.90, to end at $19.50 (Nasdaq: CNCP).

Carolina National shareholders, in the deal, may receive either $21.65 in cash or 1.4678 First National shares for every Carolina National share held, or may receive a combination of cash and stock, assuming 70% is in stock and 30% is in cash.

First National's stock dipped on Monday, losing 2 cents to close at $14.73 (Nasdaq: FNSC).

First National, headquartered in Spartanburg, N.C., is a bank holding company. Carolina National, another bank holding company, is based in Columbia, S.C.

Countrywide stock falls again

In other news, Countrywide Financial Corp.'s stock continued its slide on Monday.

The stock gave up $1.00, or 4.76%, to end at $20.00 (NYSE: CFC). On Friday, Countrywide's stock slipped by $1.02, or 4.63%, to end at $21.00.

The news comes just days after Bank of America said it will lend a $2 billion hand to the troubled mortgage lender. The fall in the stock gives credence to buzz by sell-side traders that the investment just isn't enough.

Last week, a sell-side trader called the investment a "temporary fix."

Finally, on word that its merger with Sipex Corp. closed, Exar Corp.'s stock fell on Monday.

The stock closed down 57 cents, or 4.23%, to end at $12.92 (Nasdaq: EXAR).

Under the terms of the merger, shareholders of Sipex received 0.6679 of a share of Exar in exchange for each share of Sipex.

Fremont, Calif.-based Exar is a semiconductor company, as is Sipex.

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