Vector, Corel Deal Awaits Approval

By Peter Galli  |  Posted 2003-06-06 Print this article Print

Vector Capital will buy all of the outstanding common shares of struggling Corel, providing the deal is approved by a court and shareholders.

San Francisco-based Vector Capital Corp. will buy all of the outstanding common shares of struggling Canadian software maker Corel Corp., providing the deal is approved by a court and shareholders. This follows a report by eWEEK Thursday that Corel was set to be acquired by Vector Capital. In March, Corel admitted that it was actively trying to find a buyer for its business and had signed a non-disclosure and standstill agreement with Vector Capital that let Vector investigate a takeover bid. The two companies said in a statement released on Friday that under a Plan of Arrangement, still to be court- and shareholder-approved, Corel shareholders would get $1.05 in cash for each common share held. This would include "all common shares which may become outstanding on the exercise of options, warrants and other securities exercisable for, convertible into or exchangeable for common shares. Upon the completion of the arrangement, Vector and its affiliates will own all of the outstanding shares of Corel," the statement said.
The $1.05-a-share price is slightly less than the $1.10 minimum that Corels board in March said it would recommend shareholders accept from Vector Capital. The March deal also forbade Vector from making a formal takeover bid for a price of less than $1.00 a share over the next six months.
Corels board of directors on Friday said they have agreed, subject to certain conditions, to recommend that shareholders approve the latest arrangement and to do a pre-closing reorganization of certain assets, convene a meeting of the shareholders to consider and approve the arrangement, and to diligently pursue the application for the required court approval. But, under the agreement, Corels board can still consider and support any better proposal. If that happens, Vector Capital will have to either match or better that alternative plan from a financial perspective, Corel said. Also, if Corel finds and accepts a better proposal, Corel would be "required to pay Vector a termination fee of $2 million as well as a portion of Vectors expenses relating to the arrangement." "Complete details of the arrangement will be provided as part of the information circular that Corel will distribute to registered shareholders in July 2003," the Ottawa-based company said. James Baillie, the chairman of Corels board, said on Friday that the arrangement represents an opportunity for Corels shareholders to realize the value of their shareholdings. "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," he said. "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. In light of these facts, the board concluded that the proposal put forward is in the best interests of the company and its shareholders and has therefore confirmed the transaction subject to shareholder approval and the absence of a superior transaction proposal," Baillie said. Alex Slusky, Vector Capitals managing partner, on Friday welcomed the agreement, saying he felt Corel could best move forward as a private company. "Without the costs and distractions of the public market, Corels dedicated employees can focus on what they do best—delivering the highest quality software products to a diverse global customer base," he said. Corel will apply to the court for procedural instructions within the next two to three weeks. It also intends to hold a shareholders meeting to consider the arrangement and hopes to complete the arrangement by the end of July if approved by the court and shareholders, the company said.
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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