Corel Settles Investor Lawsuit But Gets Taken Over

by Glen Shapiro, LawAndTax-News.com, New York

27 August 2003

Just days after Corel Corp shareholders voted in favour of a takeover of the limping Canadian software company by San Francisco-based Vector Holdings, Corel agreed to pay $7 million to settle a class action shareholders' suit that alleged Corel had mislead investors in 1999 and 2000 before finally admitting the truth about its financial health.

Plaintiffs' attorneys last week asked US District Judge Anita B. Brody to grant final approval of the settlement, which they said was the largest that the company could stand, although representing only a fraction of the losses incurred by shareholders.

Corel makes Windows-based software products that include WordPerfect and Corel Draw. The suit alleges that in 1999 Corel announced that it was destined to become a major force in the developing Linux market, and that its Windows business would support its entry into the Linux marketplace. However, Corel's financial results in late 1999 and early 2000 were far below expectations, nearly halving the stock price.

In their brief seeking approval of the settlement, plaintiffs' lawyers said that investors had suffered losses of about $46.3 million. The lawyers are asking the judge to award them fees equal to one-third of the settlement fund, or more than $2.3 million.

The takeover by Vector - which is subject to court approval in Ontario - is likely to result in Corel becoming a private company. Corel's board had previously threatened to put the company into bankruptcy if it lost the class action suit, so the takeover by Vector is probably seen as a positive development by the plaintiffs.

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