Corel searches for a buyer

Struggling software maker Corel is looking for a buyer.

In an announcement released Monday morning, the Canadian company said

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it has signed a nondisclosure agreement with Vector Capital that will allow the investment firm to explore a takeover bid.

Corel said it also has hired Canadian investment bank CIBC World Markets to look for other potential bidders and explore strategic options.

San Francisco-based Vector Capital recently bought out the 22.89 million shares Microsoft acquired when it made a sorely needed investment in Corel two years ago.

Corel shares have continued to sink since the Microsoft bid, lowering the value of the software giant's stake from $135 million to the $12.88 million paid by Vector.

Corel said in the statement that its board of directors had agreed to accept any Vector offer that valued Corel stock at $1.10 per share or higher and that Vector had agreed not to make an offer below $1 per share. It also said that Vector agreed not to oppose any competing offer priced at $1.25 a share or higher.

Corel shares rose more than 20 percent to 91 cents a share in early trading Monday.

Corel has been trading near cash value for much of the past year. Based on Monday morning trading, the company had a total valuation of $84.49 million. According to Corel's most recent financial statement, it had cash and short-term investments worth $75.82 million and accounts receivable of $20 million at the end of 2002.

Vector said in the statement that "based on publicly available information," it was not prepared to go up to $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," said Alex Slusky, managing partner at Vector. "We look forward to working with Corel on a mutually acceptable proposal."

Vector "approached us indicating an interest in investigating an offer for all the shares at a significant premium," James Baillie, chairman of Corel's board of directors, said in a statement. "The Corel board believes that, if an offer at such a premium is available, it should be provided to shareholders. Nonetheless, we continue to believe in the independent business strategy being followed by Corel and will continue with that strategy whether or not a sufficiently attractive offer emerges from the process initiated today."

Corel, best known for its WordPerfect office software and graphics tools, has posted significant losses in the past few years and has gone through several rounds of layoffs.

While the software maker made a number of high-profile customer wins for WordPerfect last year, analysts have said the deals are unlikely to help the company's bottom line. Instead, the company has promoted a comeback strategy based on tools that add XML (Extensible Markup Language) functions to common types of documents.