Corel Seeks Buyer

By Peter Galli  |  Posted 2003-03-24 Print this article Print

Actively seeking a buyer, the Canadian software firm has signed a non-disclosure and standstill agreement with Vector Capital.

Struggling Canadian software firm Corel Corp. is actively trying to find a buyer for its business and has signed a non-disclosure and standstill agreement with San Francisco-based Vector Capital that lets Vector investigate a takeover bid for the struggling software maker. But Corel can still try and find alternative buyers and pursue strategic alternatives for its business, and so it has appointed Canadian investment bank CIBC World Markets to help it in this regard, the company said in a statement on Monday. This announcement follows hot on the heels of Microsoft Corp.s sale to Vector Capital of the 22.89 million Corel shares (a 24.6 percent stake in the company) it bought in October 2000. Microsoft took a loss of more than $100 million on the sale of the shares, which it paid $135 million for in October 2000 and this month sold to Vector for some $13 million.
In a statement released on Monday, Corels board of directors also said they have appointed Canadian investment bank CIBC World Markets "to assess and identify other strategic alternatives to maximize value for its shareholders…Pursuant to the agreement signed today with Corel, Vector will be given the opportunity to commence a detailed due diligence review of Corels business and to make a proposal to Corel and its shareholders for the acquisition of Corel.
"CIBC World Markets will assist Corel in exploring its strategic alternatives, and will immediately begin soliciting proposals from other parties, who will also be permitted to undertake due diligence reviews of Corels business," the statement said. Corels board also said that it has agreed to recommend that shareholders accept any offer from Vector Capital that values its shares at $1.10 or higher. The statement also said the agreement forbade Vector from making a formal takeover bid for a price of less than $1.00 a share over the next six months. Vector has agreed to not oppose any competing proposal that "provides for payment …of at least $1.25 per Series A share and for payment to the holders of Corels common shares of at least 105 percent of Vectors best offer," the company said. James Baillie, the chairman of Corels board of directors, said on Monday that Vector had approached Corel and indicated they were interested in investigating an offer for all its shares at a significant premium. "The Corel Board believes that, if an offer at such a premium is available, it should be provided to shareholders. Nonetheless, we continue to believe in the independent business strategy being followed by Corel and will continue with that strategy whether or not a sufficiently attractive offer emerges from the process initiated today," he said. But Alex Slusky, Vector Capitals managing partner, said in a statement on Monday that while the firm was "impressed with Corels business and product mix and appreciate the Boards expression of support for a transaction at or above US$1.10 per share, based on publicly available information, Vector Capital is not yet prepared to extend an offer at US$1.10 per share. "As we conduct our due diligence over the next 30 days, however, we hope to determine an offer price that will be attractive to both Vector Capital and to Corels common shareholders. We look forward to working with Corel on a mutually-acceptable proposal," he said. Corels shares were trading at $0.91 on the Nasdaq Exchange around noon PST on Monday, up nearly 23 percent or 17 cents a share on the back of the news. The last two years have been a rollercoaster ride of ups and downs for Corel and its shareholders. After announcing the sale of a 24.6 percent stake to Microsoft in October 2000, Corel announced at the end of January 2001 that it was going to sell off its Linux desktop distribution unit. Toward the end of that year, Corel finally sold its Linux desktop distribution to Xandros, which shipped the first version of its distribution last October. Earlier this month Corel also released the first beta of WordPerfect Office 11, which it hopes will attract many unhappy Microsoft Office users. That follows several OEM wins last year. In August 2002, Hewlett-Packard Co. and Dell Computer Corp. expanded their relationships with Corel to offer its word processing package, WordPerfect 10, and spreadsheet application, Quattro Pro 10, with some of their computer lines. That followed a move earlier in the year by Sony Corp. to ship WordPerfect on a range of its PCs, from budget to high-end machines.
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    Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

    He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

    He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

    He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

    He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

    He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

    His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

    For numerous examples of his writing you can search under his name at the eWEEK Website at


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