09:56 AM

Corel Invites Takeover Bid

The software company has invited Vector Capital, which recently bought Microsoft's 20% stake, to look at its books

TORONTO (AP) - Software company Corel Corp. invited a takeover bid from Vector Capital, a major new shareholder, and said it would also explore other alternatives.

The announcement comes two weeks after Microsoft Corp. sold its 20 percent stake in Corel to Vector CC Holdings, an affiliate of San Francisco-based venture capital firm Vector Capital.

Vector said it was paying about $12.9 million for the stake, leaving Microsoft with a loss of more than $100 million on the investment made in 2000.

Ottawa-based Corel said Monday it entered into an agreement to give Vector CC Holdings a chance to look at its financial books. It also hired CIBC World Markets to identify other strategic alternatives.

While Vector examines the Corel books, Corel's board is pushing for an offer of at least $1.10 a share, which would value the company at about $92 million.

"Vector will be given the opportunity to commence a detailed due-diligence review of Corel's business and to make a proposal to Corel and its shareholders for the acquisition of Corel," said the announcement.

At the same time, it said CIBC World Markets would solicit proposals from other parties.

"Vector has agreed to not oppose a competing proposal that provides for payment to Vector of at least $1.25 per Series A share and for payment to the holders of Corel's common shares of at least 105 percent of Vector's best offer," Corel said.

The agreement with Vector prohibits the investment firm from making a takeover bid below $1 a share during the next six months.

Alex Slusky, Vector Capital's managing partner, said his firm "is not yet prepared" to offer $1.10 a share but intends to make a bid within 30 days after examining the books.

When Microsoft announced its investment in Corel in 2000, the two companies intended to develop applications based on the Microsoft.Net initiative.

The idea was to combine Corel's expertise in software development with the Microsoft platform. It was welcome news to Corel, which had gone through months of cost-cutting due to falling sales of its CorelDraw and WordPerfect products.

Microsoft's investment helped return Corel to profitability in the first three quarters of fiscal 2001. But a difficult fourth quarter left the company with a loss of $7.3 million that year. In 2002, Corel's losses totaled $96.4 million.

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