Corel, Vector Haggle Over Takeover Price

As buyer and seller haggle over the asking price, San Francisco-based Vector Capital may have a runaway bride on its hands, according to a statement released Monday by both companies.

Vector Capital and its affiliate Vector CC Holdings, LLC, have been in forward motion in recent months to acquire Corel Corporation , a content provider based in Ottawa, Canada that specializes in business process management and XML-enabled business solutions, such as its WordPerfect and CorelDRAW products.

According to a company spokesperson, Corel began shopping around for investors in December 2002 when it caught Vector’s eye.

Vector Capital is a venture capital firm that invests in software and software-enabled service firms, among them LANDesk Software, Real Networks , Savi Technology, and ProcessClaims.

The two companies entered a discussion phase, and by March 9, Vector announced plans to purchase 22,890,000 preferred Corel shares from Microsoft Licensing, Inc. for little more than .50 cents per share.

If approved, Vector’s purchase represents approximately 95.38 percent of all Corel’s issued and outstanding preferred shares, which if converted to common shares would give Vector a 19.95 percent stake in the company. A move that Corel’s spokesperson said would make them the largest shareholder to date.

But as of the end of last week, negotiations reached a period of uncertainty and both companies have officially entered into a non-disclosure and standstill agreement.

Corel’s Board of Directors is only recommending that shareholders support a Vector acquisition at $1.10 or more per share.

According James Baillie, until Corel’s shareholders accept the asking price, the company will happily maintain its independent business strategy.

In the meantime, Corel’s Board of Directors has hired CIBC World Markets to look into other alternatives from interested parties, the company said.

However, Vector will have the next 30 days of due diligence to review Coral’s books and then make a proposal to the company’s shareholders as planned.

According to Vector’s Alex Slusky, his company still remains interested in the acquisition, but the verdict is still not out on whether or not Vector will pony up the desired share price.

“We are impressed with Corel’s business and product mix and appreciate the Board’s expression of support for a transaction at or above $1.10 per share,” said Slusky. “Based on publicly available information, Vector Capital is not yet prepared to extend an offer at $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 Corel’s common shareholders.”

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