Corel Shareholder Group Looks to Block Takeover

Corel , maker of the WordPerfect document software, now has a shareholder rights group protesting that a bid to take the company private by San Francisco-based Vector CC Holdings should not be approved at a vote this week, or by regulators in the U.S. and Canada.

The Corel Rescue group issued a press release on Monday detailing its
opposition to Corel’s deal with Vector. The group said that the
“closed-door” transaction allowed Vector to buy Microsoft Corp.’s 20 per cent non-voting stake in Corel “at below the all-time low price” in March and immediately proposed a hostile takeover.

“Representing Corel’s shareholders opposed to the under-valued takeover attempt by Vector CC Holdings LLC, the Corel Rescue group is appealing to Canadian and U.S. regulators and the Superior Court of Ontario to restore shareholder representation and to investigate the takeover arrangements for potential conflicts-of-interest or malfeasance by Vector CC Holdings, Corel Corporation Management and Board of Directors,” the group said.

Vector Capital is a venture capital and private equity firm, which has made several investments in the software and IT sectors, including LANDesk Software, Savi Technology and ProcessClaims.

Alex Slusky is the managing partner of Vector Capital, and his buyout firm may face shareholder resistance at the meeting where a vote will be held on the deal on Wednesday. Vector will have to get two-thirds of all Corel voting shareholders to approve the deal.

If the deal to take Corel private by the San Francisco-based venture capital firm is approved this week, the company’s shares could be delisted from both the Nasdaq and Toronto Stock Exchange within weeks.

The Corel Rescue group also said that in early June “Corel’s board of directors caved in and signed an acquisition agreement, which called for Corel’s board and management to disenfranchise the shareholders and to devise a rigged process aimed at maximizing Vector’s chances of stealing the company from its existing owners.”

The group says there is no rationale to sell the shares at this time, as Corel has cash reserves of over $75 million and no debt, and that the takeover would not be in shareholders best interest.

The group goes on to say that Corel’s management recently did an about face regarding the software company’s future prospects.

“Corel’s management has been extremely bullish about Corel’s prospects
before suddenly changing their tune to fit Vector’s gloomy message to
shareholders,” the Corel Rescue group said.

Corel Rescue claims it has the support of close to 10 million of the
company’s voting shares. Charles Golden, who owns around 60,000 Corel shares has joined with other dissident shareholders to create Corel Rescue and the web site

The company’s controversial former Chairman and CEO, Michael Cowpland “stands firmly in opposition to the proposed deal,” according to Corel Rescue.

Prior to Monday’s offensive by Corel Rescue group, the company on August 13 issued a press release advancing its perspective.

Corel said it wants to remind shareholders to “vote on the proposed
acquisition by Vector Capital either by submitting a proxy or attending the Special Meeting in Toronto on August 20, 2003.”

“The proposal has been unanimously recommended by the Board of Directors of Corel after a thorough analysis of Corel’s historical operating results, financial condition, and prospects, as well as the market conditions, trends and future prospects of the industry in which Corel operates,” the company said.

Corel says the deal values the company’s shares at “a 42 percent premium” over the price when talks with Vector began. Corel’s board hired CIBC World Markets as its financial advisor in the transaction. Vector became Corel’s
biggest shareholder earlier this year, when it bought up nearly 23 million shares from Microsoft.

Corel’s software sales and stock price have suffered in recent years, as the company posted major financial losses and layoffs, because of weak demand for its WordPerfect software.

Corel has shifted strategy and has pinned its future hopes on providing tools for creating content based on XML, the Extensible Markup Language.

The company recently announced a deal with SiberLogic Inc. to provide its collaborative Web-based XML content development solution to Franklin University and the Logistics Support Engineering Division of the U.S. Army’s Armament Research, Development and Engineering Center.

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