Considering Corel's (Nasdaq: CORL) recent financial results and statements concerning its cash position, its merger with Inprise/Borland Corp (Nasdaq: INPR) may not be a fair deal for Inprise investors.
Inprise/Borland said Thursday it had asked its financial adviser for an updated opinion on the fairness of the exchange ratio for its pending acquisition by the Canadian software developer.
Corel/Inprise: Raw deal for Inprise?
The company said it made the fairness request after taking into account Corel's first quarter financial results and statements regarding its cash position. Earlier this year, Inprise/Borland agreed to a deal to exchange each of its shares for 0.747 of a Corel common share. The merger was going to create a "Linux powerhouse," according to the companies.
Inprise/Borland has every right to second guess its Corel marriage. Shareholders have been against the deal because of Corel's recent problems. Meanwhile, the value of the stock-swap merger has plunged from its original terms. On Feb 7, Corel was paying $1.07 billion in stock. By March 20, the deal was valued at just $718 million. Based on Corel's closing price Thursday, Inprise is valued at just $371 million.
Shares of Inprise/Borland closed at 5 5/16 Thursday, well below their 52-week high of 20. Corel's bad news has also been a drag for Inprise investors. When Corel reported a wider-than-expected first-quarter loss of $12.4 million, Inprise shares took a tumble. Corel closed at 6 27/32 Thursday, down from a 52-week high of 44 1/2.
The ever-optimistic executives at Corel maintain the Inprise/Borland merger is on track, but they've been wrong before -- especially with Wall Street guidance.
Inprise/Borland also reported its first-quarter results Thursday. Net loss was $1.15 million, or 2 cents a share, on revenue of $46.50 million. Revenue was up slightly from $43.4 million in the same period a year ago. Loss narrowed from $25.6 million or 54 cents a share in the first quarter of 1999. No estimates were available.
Earlier this month, Investor Management Insights Inc. sued to block the proposed merger, calling the deal inadequate.
Inprise competes with Computer Associates (NYSE: CA), Compuware (Nasdaq: CPWR) and Sun Microsystems (Nasdaq: SUNW). Corel battles Microsoft (Nasdaq: MSFT) and Red Hat (Nasdaq: RHAT).