vector capital
corel holdings
corel corporation

Corel Buys Out Corel

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Apologies for the confusing headline, but I couldn’t resist.

This morning, long-time software maker Corel Corporation turned over full ownership to Corel Holdings, a limited partnership controlled by an affiliate of Vector Capital, majority investor of the company behind many familiar software programs like WordPerfect, CorelDRAW, WinZip, Paint Shop Pro and WinDVD (most of them obtained through acquisition of smaller software firms).

The LP of the private equity investment firm, which already owned approximately 68% of the Corel Corporation, announced this morning that it has successfully completed its tender offer to purchase all outstanding common shares of the company, evidently not including those owned by Corel Holdings and its affiliates. The shares were purchased, in cash, at a unit price of $4.00, excluding interest and less applicable withholding taxes. Painful, because Vector had already offered to buy the company for $11 per share in March 2008.

With benefit of hindsight, Corel should have probably accepted that offer, of course.

Corel Holdings is now commencing an offering period of its tender offer to acquire all remaining common shares of Corel Corporation, which will expire at December 4, 2009.

Vector Capital assumed control over Corel Corp for a reported $133 million in 2003. The VC firm subsequently moved to take the company public in 2006, but retained majority ownership. The partial spin-off wasn’t much of a hit: Corel initially priced its IPO at $18 to $20 and later revised that to $16. But the company saw shares open at $15.36, and it has never once traded above that price (as is often the case when stocks open at a lower price point than initially set). Shares currently change hands for about one quarter of the opening price.

Corel Corp earlier this week justified the offer to take the company private, saying that complete ownership is necessary to inject capital quickly and avert a default on its loans. The company, once a fierce rival to Microsoft on the productivity software playing field, had been on the ropes for quite some time now. Corel was required to keep its total debt level below 2.75 times its trailing 12-month EBITDA, but on Monday indicated that it expected to fail that test this month.

The economic downturn sure rocked this company, established in 1985, very hard. Let’s see how it will fare now that it’s under Vector’s wings in its entirety again.

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