Gateway Rejects Retail Buyout Offer
Gateway said Friday it had rejected a bid by the founder of the eMachines brand to purchase the retail portion of its business in a $450 million transaction. Lap Shun Hui had made the unsolicited offer in late August, saying separating the business would make the company more competitive.
Hui first expressed interest in acquiring Gateway's retail arm in a letter dated August 3. Gateway's board failed to respond, so the entrepreneur sent a second letter on August 21, restating his offer although criticizing the board for being too lax in solving the company's financial woes.
"Gateway's stock price has continued to decline and the failure to name a replacement CEO for over six months has left Gateway in a position where it is unable to clearly and credibly articulate its strategic direction to the market," he wrote at the time.
Shares of Gateway have tanked over the past few years, reaching a low of $1.30 as recently as mid August. Talk of an acquisition excited Wall Street, and the stock rebounded slightly in its wake to around $2.00 per share in the past week. However, now it appears as if it is not to be.
The company said that "after careful consideration and in consultation with its financial and legal advisors" such an transaction "was not in the best interest of shareholders." However, the company said it was committed to enhancing shareholder value.
Representatives for Hui were not available for comment. However, his August 21 letter indicates that the board's rejection may not be the end of the story. In the event of a rejection, he entertained the possibly of buying the entire company.
According to financial analysts, Hui could offer $800 million or more for the entire company in that event. Some believed his moves had more to do with drumming up interest in the company from other potential suitors, thus driving up the value, and stock price, of the company.