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LinuxWorld: A tale of two mergers

May 17, 2000, 12:55 (1 Talkback[s])
(Other stories by Eileen Cohen)

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"The proposed takeovers of Andover.net by VA Linux Systems and of Inprise/Borland by Corel Corp. made big headlines when they were announced in early February. Neither deal is proceeding according to its original timetable. The VA-Andover deal was originally due for completion in mid-May; now, the soonest it can happen is mid-June. The Corel-Inprise acquisition, once expected to close in June, was cancelled on May 16. The superficial resemblance of the two situations invites a look at the reasons for the delays and the ultimate collapse of the Corel-Inprise deal."

"The hang-up in each case stems fundamentally from the caprices of the stock market: both purchases are worth far less now than when they were crafted back in February, because the deals involved the trades of Corel's and VA's stock -- and the prices of both have declined significantly since then."

"That's maybe the biggest disadvantage of what has been going on in the [mergers and acquisitions] world, where companies have been using their stock as currency for acquiring other companies," Susan Thorner, a corporate and securities lawyer in San Francisco, told LinuxWorld. "It's all very well when the value of the stock just keeps going up, but these guys got caught in the downdraft, and these two situations illustrate what can happen." As a result, management at both Andover.net and Inprise have taken action recently to reevaluate their companies' positions."

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