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Corel investors give OK to takeover

Shareholders of the troubled maker of WordPerfect approve a takeover bid by privately held Vector Capital.

Struggling Canadian software maker Corel is set to become a privately held company, after shareholders approved a $98 million buyout offer Wednesday by venture capital firm Vector Capital.

Corel executives reported that a total of 81.1 percent of Corel common shareholders--or 72.7 percent excluding shares already owned by Vector--voted in favor of the proposal at a special shareholders meeting in Toronto. The proposal, which gives investors $1.05 for each share of Corel stock, required approval by investors who represent at least two-thirds of Corel's 93 million outstanding shares.

CEO Derek Burney said in a teleconference that followed the vote that he does not expect the buyout to result in any significant changes to Corel's product line or management.

"The early conversations we've had with Vector is that they've expressed support for everything we're doing, including the employee talent pool, the customer base we have and generally what we do," Burney said. "They've expressed their confidence in the current management team."

San Francisco-based Vector specializes in turning around financially troubled technology companies, often in preparation for their sale to a larger competitor.

Corel plans to seek final approval of the takeover Thursday in the Superior Court of Ottawa, where some shareholders vowed to oppose the buyout, claiming that Corel and Vector had misled investors. Corel executives were confident that the deal, which has been approved by Canadian securities regulators, would survive any challenge.

Chairman James Baillie said he understood the frustration felt by dissident shareholders but that the Vector deal was the right route, given current market conditions.

"I have a lot of sympathy with the people...who expressed serious concerns," he said during the teleconference. "They're enthusiastic about the company, enthusiastic about its prospects. The difficulty is that when you crunch the numbers...this offer is the opportunity our shareholders should have available to them."

Corel is most widely known for its graphics applications, including the long-running CorelDraw line, and for WordPerfect, the word processing and related office software the company acquired from Novell in 1996. CorelDraw's market share has slowly eroded in recent years, a result of increasingly tough competition from Adobe Systems and other rivals. In addition, WordPerfect has yet to make a significant dent in the dominance of Microsoft's Office despite recent deals with PC makers that put Corel's software on many low-end PCs.

After a derailed venture into Linux software, the 18-year-old Canadian software maker most recently pinned its fortunes on applications that allow office workers to add extensible markup language (XML) functions to documents.

Corel's fortunes began to sag in the late 1990s, and the company was on the verge of collapse two years ago, when Microsoft revived it with a $135 million investment that gave Microsoft a minority, nonvoting share in the company. The Redmond, Wash., software giant sold its share to Vector earlier this year.

Despite making several rounds of layoffs, Corel has continued to post losses, and the company's stock price had dipped well below $1 per share before the Vector proposal was announced. Analysts had questioned the company's ability to turn itself around, citing strong competition from Adobe and Microsoft.