Taiwanese PC manufacturer Acer is buying US giant Gateway at a cost of $710m (£354m).

The new partnership will overtake Chinese rival Lenovo to become the world's third largest PC vendor. Acer expects revenues for the new company to exceed $15bn (£7.5bn), with annual shipments of over 20 million systems worldwide.

Under the terms of the acquisition, Acer will purchase all outstanding Gateway shares at a price of $1.90 (£0.95) each. The deal is expected to be completed by December.

As a further blow to Lenovo, Gateway plans to use its right of first refusal to purchase a majority stake in PB Holding, parent company to Packard Bell. The new deal with entrepreneur Lap Shun (John) Hui is likely to prevent Lenovo's previously-announced attempt to takeover the PC giant.

The Gateway merger is a milestone for Acer, said chairman J T Wang.

'The acquisition of Gateway and its strong brand immediately completes Acer’s global footprint by strengthening our US presence,' said Wang.

'It will be an excellent addition to Acer’s already strong positions in Europe and Asia.'