VNU Net: Inprise/Borland and Corel scrap mergerMay 16, 2000, 21:48 (0 Talkback[s])
(Other stories by Ian Lynch)
By Ian Lynch, VNU Net
"Cash-strapped Corel's proposed acquisition of software tools company Inprise/Borland, which was intended to create a 'Linux powerhouse', is off.
The cancellation of the $1.07bn deal inked in February is said to be by mutual agreement and Corel has waived any payment of termination fees by Inprise/Borland, despite its current lack of cash.
Under the terms of the proposed merger, Inprise/Borland shareholders were to receive 0.747 of a Corel common share for each share of its common stock. The two companies had already entered into a three-year confidentiality agreement, which remains in place.
However, Inprise/Borland asked its financial advisers to review the deal in late April for "fairness to shareholders in financial terms" following a series of bad news days for Corel.
Corel stated in its last filing to the US Securities and Exchange Commission that it could run out of cash in three to four months if the merger did not go ahead, and that it had no other sources of financing secured.
This came on the back of a profit warning which said that the company's $12.4m loss for the first quarter of 2000 would be repeated over the next six months. Corel chief executive Michael Cowpland has also been in trouble with US regulators over security law violation charges.
Now, however, the Canadian outfit claims that it is evaluating offers of alternative financing. The company also plans to press ahead with the implementation of $40m worth of cost savings every year to support its current revenue expectations.
Tight-lipped Corel executives speaking at a news conference today refused to reveal details of either the alternative financing deals or the cost savings, saying only that plans were being drawn up and more details might be available by the time the company discusses its second quarter results on 19 June. They also said the news would not affect announced shipping plans for products such as Corel Draw.
John Blaine, Corel's new chief financial official, said: "Corel has cash in the bank and will implement an aggressive cost saving plan to save £40m annually."
Blaine refused to comment on whether the $40m savings would return the company to profitability, again re-iterating that it expects to report similar losses to the first quarter total of $12.4m in both the next two quarters. Corel also confirmed it did not currently have a line of credit with any financial institution.
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