Corel: Pragmatism led to acceptance of Vector bid

Corel Corp.‘s chairman said Monday he is satisfied that Vector Capital’s US$1.05 a share offer is probably the best the company’s shareholders are going to get.

The San Francisco venture capital firm first extended its takeover bid to the financially-troubled Corel in March. Terms of the agreement stated that Vector would pay no less than $1.00 a share, but wouldn’t oppose competing offers over $1.25. CIBC World Markets was brought in to evaluate any such offers.

Chairman of the board James Baillie said that CIBC looked at “”a lot nibbles”” and two or three more substantial offers but very few progressived to serious interest. “”There was a thorough and thoughtful examination of all options. We’re satisfied that the proposal tabled by Vector is the best available for our shareholders,”” he said.

Baillie said the decline in the software market is such that Corel doesn’t have the luxury of waiting for its software to gain an audience. He said that the company’s newer enterprise products like its Smart Graphics studio and some of the XML-based product lines are “”generating and awful lot of excitement, but there’s a big difference between excitement and revenue.””

Corel president and CEO Derek Burney said that Corel’s tentative acceptance of the Vector offer has met with mixed criticism from shareholders, some of whom expressed stalwart support for the company.

Baillie added that “”I have received quite a number of e-mails from people who object and object strongly to the transaction. These are people, I think, who really believe in Corel.””

Burney said he too was torn between company loyalty and fiscal responsibility. “”I must balance my inherent enthusiasm for the company and its prospects with a pragmatic view of how best to realize value for our shareholders.””

Financial analyst Duncan Stewart, with Toronto-based Tera Capital Corp., described Vector’s offer as “”low-ball,”” but back in March the software market was in dire straits and the economy was flagging due to the American war in the Gulf.

“”It sounds to me that the board did a pretty good job of soliciting bids with CIBC,”” he said. “”The chance of somebody coming in with a three or four dollar bid just doesn’t look like its real likely at this point.

“”I have to, at some level, trust the management and trust the board of directors,”” he added. “”They know more than I do, they know more than all those retail investors who are really upset and saying that they’re stealing the company or they’re giving it away.””

Burney said he doesn’t expect any radical changes at Corel if the Vector deal goes through. (It’s still pending shareholder and court approval.) “”I don’t think this spells the end for Corel at all,”” he said, adding that Vector’s acquisition track record indicates that the company would likely remain in Ottawa. Vector could not be reached for comment at press time.


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