The rumblings finally became true: Software vendors Corel and Inprise/Borland yesterday said separately that they have canceled their three-month-old merger agreement.
In its announcement, Ottawa-based Corel said dropping its plan to buy Inprise/Borland "is in (Corel's) best interest" because of "significant changes" that have occurred since the deal was signed in February.
Scotts Valley, California-based Inprise/Borland sounded a similar theme in its press release on the termination of the agreement between the two companies. "Much has changed since the merger was agreed to more than three months ago, and our board concluded that it would be best to cancel the merger on an amicable basis," said Dale Fuller, Inprise/Borland's interim president and CEO, in a statement.
The all-stock deal for Corel to buy Inprise/Borland initially was valued at $2.44 billion. But it ran into trouble last month, when Corel announced a first-quarter loss of $12.4 million and said it expected more red ink during the next six months.
The applications and operating systems vendor also warned that it could run out of cash by July if the Inprise/Borland acquisition fell through and business conditions didn't improve. To add to the problems, a former member of Corel's board of directors filed suit in an attempt to block the acquisition, claiming that the deal was "unfair."
Following all the bad news, the price of Corel's stock fell to just one-third of what it was when the deal was signed. As a result, Inprise/Borland, a maker of application development and Internet access tools, asked its financial advisors to re-evaluate the "fairness" of the merger agreement.
Corel had hoped to use Inprise/Borland to boost its presence in the Linux software market, following on the heels of an earlier acquisition of a Linux vendor and an investment in another one. Corel officials were scheduled to hold a press conference today to discuss the termination of the deal and how the company plans to address its financial problems.