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By | Kelly Fiveash 24th November 2009 11:28

Corel begs for survival by giving takeover thumbs up

As long as I know how to love I know I'll stay alive

WordPerfect maker Corel Corp confirmed yesterday that its majority investor, Vector Capital, planned to take the software vendor private in an effort to prevent a default on loans.

The firm filed an amendment with the US Securities and Exchange Commission on Monday. It said it had expanded, added and clarified “certain disclosures” that stated Vector Capital would acquire the 32 per cent of shares it doesn’t already own to prevent a credit default by 30 November.

Corel urged shareholders to view the amendments.

Cayman Islands-based holding company VCP II International LLC - which manages private equity funds together with affiliates, that include Vector - organised the deal, said Corel.

It said Vector would acquire “all of the issued and outstanding shares not owned by Vector for $4.00 per share”, subject to terms of the agreement. The firm added that its recommendation that shareholders tender their shares pursuant to the tender offer commenced by Corel Holdings L.P. was unchanged.

Ottawa, Canada-based Corel said it expected to see its total debt level climb to a rate where it could default on credit without the help of Vector.

The firm has $23.6m in cash and in principle it could prepay $15m upfront, allowing its debt ratio to dip to a more manageable 2.64, but that would push its working capital down considerably. Corel said such a move would be insufficient to support the business in the short-term.

"Vector believes that if it is going to commit new equity financing to the company using funds from its limited partners under present circumstances, it will need the operational and strategic control of the company that can only come with total ownership in order to safeguard that investment," Corel said in the filing.

Vector Capital, based in San Francisco, offered $3.50 a share at the end of October. It increased that offer to $4 a share earlier this month. At the time, Corel told regulators in Canada that it had received an improved offer to purchase the firm, and confirmed the board was mulling the possible buyout. ®

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