Gateway Spurns $450 Million Offer for Retail Business
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Gateway Inc. (GTW) on Friday spurned former eMachines owner Lap Shun Hui’s offer to buy the struggling personal-computer maker’s retail operations for $450 million, saying the bid is “not in the best interest of shareholders.”
Gateway released a statement saying that it turned down Mr. Hui’s offer after consulting with its financial and legal advisors, Goldman Sachs, and the law firm of Skadden, Arps, Slate, Meagher & Flom LLP.
On August 23, Mr. Hui made public his $450 million for Gateway’s retail business, and also offered to buy the entire company and split off its different business operations. In a statement at that time, Mr. Hui said he originally approached Gateway with his offer on August 3, and said he was disappointed that Gateway had not replied “constructively” to his offer.
Mr. Hui’s statement included a letter to interim Gateway Chief Executive Rick Snyder saying that what he called recent inaction in picking a permanent replacement for ousted CEO Wayne Inouye, who left Gateway in February, “has left Gateway in a position where it is unable to clearly and credibly articulate its strategic direction to the market.”
Mr. Hui came to Gateway in early 2004 when he sold his low-cost PC company, eMachines, to Gateway for $262 million. Mr. Hui became Gateway’s second-largest individual shareholder, and held 8.2% of the company’s shares outstanding, according to Gateway’s most-recent proxy statement. Only Gateway founder and former CEO Ted Waitt, who holds about 24% of the company’s stock, is a larger individual shareholder than Mr. Hui.
Mr. Hui isn’t the only interested party in Gateway of late. On August 21, Birmingham, Alabama-based Harbert Management Corp. disclosed that it had acquired 10.2% of Gateway’s shares outstanding and met with company officials to discuss ways of improving Gateway’s business and market position.
The double-shot of Harbert and Mr. Hui’s interests caused a week-long surge in Gateway’s stock that sent the shares up almost 40% last week. The stock pared back by 5 cents to $1.95 a share after Gateway rejected Mr. Hui’s bid.
