Corel to Buy Inprise for $1 Billion

Corel Corp. agreed to buy Inprise Corp. for $1.07 billion in stock in what would be the largest Linux acquisition ever.

Corel, which makes software for the Linux operating system as well as for Windows and Apple systems, will exchange 0.747 share for each Inprise share, valued at $14.94, 13% more than Inprise’s closing price of $13.25 on Monday. Corel said it will issue 53.7 million shares to acquire Scotts Valley, Calif.-based Inprise’s 71.7 million shares.

Corel shares fell 69 cents to close at $19.31 on Nasdaq on Monday.

With Inprise, Corel would get Internet-access products for operating systems including Linux. Linux is an open-source operating system seen as a potential rival to Microsoft’s Windows NT, the dominant operating system on the market.

Corel, which had three straight years of losses before 1999, is hoping Linux will solidify its future. The Linux market is forecast to grow at more than 25% a year through 2003, according to research firm International Data Corp.

“It makes Corel one of the big three in the Linux market,” said Barry Jaruzelski, a partner at Booz, Allen & Hamilton Inc. who follows the Linux sector as a management consultant. “Corel will have the broadest offering of Linux software.”

Corel would join Red Hat Inc., which agreed to buy closely held Cygnus Solutions for $697.6 million in November, and VA Linux Systems Inc., which agreed to buy Andover.Net Inc. for about $1.04 billion last week, as the leading Linux players, Jaruzelski said. Inprise had a profit of $22.7 million on revenue of $174.8 million for 1999, and Corel had a profit of $16.7 million on revenue of $243.1 million for its fiscal year ended Nov. 30.

Shareholders of Inprise, which was formerly known as Borland International Inc., would own 44% of the combined company, to be called Corel. It will be based in Ottawa, where Corel is.

Dale Fuller, Inprise interim president and chief executive, will become chairman of Corel. Michael Cowpland, Corel’s chairman, president and chief executive, will be president and chief executive.

Corel expects the acquisition to close in late spring, pending shareholder and regulatory approval. The transaction is expected to add to cash earnings before amortization of goodwill, Corel said.

Microsoft bought 10% of Inprise in June.