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VNU Net: Inprise/Borland and Corel scrap merger

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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