Corel okays Vector’s takeover bid

TORONTO: Software maker Corel Corp. has agreed to accept a long awaited takeover bid from Vector Capital, a deal that would end its often volatile run as a public company. Ottawa-based Corel, best known for its WordPerfect and CorelDraw word processing and graphics packages, said the San Francisco-based venture capital firm would offer $1.05 a share in cash for all its common shares, making the bid worth about $97.6 million.

Vector is already Corel's largest shareholder, holding preferred shares that, if converted, would represent about 20 percent of the common stock.

The agreement was struck one day after Corel said there was a high likelihood it would agree to be taken over, but for less than the $1.10 a share it originally demanded. The Thursday announcement sent its shares tumbling.

Corel stock closed down 2 cents, or about 2 percent, at 93 cents on Nasdaq with more than 1.6 million shares traded. In Toronto, Corel fell 4 Canadian cents to C$1.25 with more than 500,000 shares changing hands.

The possibility of a deal arose in March, when Corel said it signed an agreement with Vector allowing it to conduct due diligence and make a formal takeover offer. Corel said it would recommend shareholders accept a bid of at least $1.10 a share.

"The price per share represents a premium of 42 percent to the market immediately prior to our announcement that Vector had entered into a non-disclosure and standstill agreement with Corel," Corel chairman James Baillie said in a statement.

"We have also received the opinion of CIBC World Markets that the cash consideration to be received by the shareholders under the arrangement is fair from a financial point of view."

$2 million breakup fee

Corel said its board would recommend the deal but was open to other offers. The company has agreed to pay Vector a termination fee of $2 million as well as a portion of Vector's expenses if a better bid comes forward.

Corel executives were not available for comment. The company said they would hold a conference call with the investment community on June 9 and it hopes to complete the deal by the end of July. Corel's original agreement with Vector was struck after the U.S. firm bought 22.89 million Corel preferred shares from Microsoft Corp.

Microsoft bought Corel shares in October 2000 for $135 million as the companies planned joint work on Microsoft's .NET initiative to deliver software and services over the Web. Founded in 1985, Corel has had a volatile run since it first began trading on Toronto in 1989. It shot to fame with its award-winning CorelDraw graphics software, but stumbled badly after it acquired the WordPerfect word processing program in 1996 and attempted to take on Microsoft.

Corel's high-profile founder, Michael Cowpland, later resigned and was charged in October 1999 with three counts of violating securities law for trades made in 1997. The company briefly returned to investor favor when its involvement with the Linux operating system sent its shares as high as C$64.65 in December 1999.

© Reuters