ADOBE EMERGES AS WHITE KNIGHT FOR ACCELIO.

(Reuters) - Adobe Systems (ADBE.O) Inc. emerged on Friday as Accelio Corp.'s white knight (LIO.TO), riding to the rescue of the Canadian business forms maker with a $72-million all-stock offer that trumps a hostile bid from Open Text Corp. (OTEX.O) (OTC.TO)

The offer from network publishing firm Adobe is 68 percent higher than Open Text's C$68.5 million ($42.8 million) cash bid, and follows an announcement that five of Accelio's major shareholders will tender their shares to Open Text.

Adobe declined to say whether its offer, which has the backing of Accelio's board, would attract support from the shareholders that Open Text says have already committed to its offer, or from any major shareholder.

"The offer is superior to the offer on the table," said Shantanu Narayen, Adobe's executive vice-president of worldwide products. "We think there is a great strategic fit between the two companies, and are optimistic about our ability to close."

Almost one third of Accelio's 648 workforce could lose their jobs if the merger goes through, officials said.

Shares of Ottawa-based Accelio soared 43 percent, or C$1.30, to C$4.37 on the Toronto Stock Exchange on the news of Adobe's bid, a level that is still shy of the C$4.50 value put on Adobe's all-stock offer. Adobe's shares jumped 8 percent, or $2.69, to $36.39 on Nasdaq.

Meanwhile, shares of Waterloo, Ontario-based Open Text were down 16 Canadian cents at C$41.33, following a 13 percent slide since it unveiled what Accelio has described as an "insulting" takeover offer.

Adobe said the purchase of Accelio would bolster its stable of electronic forms products. Adobe Acrobat, with 400 million copies distributed, has become a common way to read Internet-based documents. The company has said that the market for electronic forms will exceed $3 billion a year by 2003.

"We looked at the technology, and Accelio is the market leader in these solutions and they have an impressive customer list in manufacturing, government, and financial institutions," said Narayen.

Waterloo, Ontario-based Open Text, a maker of collaboration software, first announced its cash offer for Accelio on Dec. 17 and Accelio formally rejected it on Jan. 7.

In early January, Open Text said it and other shareholders controlled 18 percent of Accelio's shares.

Both offers are dependent on winning two thirds of Accelio's outstanding shares.

The agreement is subject to a $2.9 million break-up fee if Accelio's board of directors approves or recommends a competing offer, the companies said in separate statements.

Accelio's stock has appreciated 43 percent since Open Text's hostile offer in December, but it is still down sharply from the high of C$17.75 it hit during the dot-com boom in March 2000.

Accelio has said the Open Text offer grossly undervalues the company, although AGF Management, owner of 11.8 percent of Accelio's shares, said this week it intends to tender its shares to Open Text.

Accelio's Chief Executive Kevin Francis said Accelio's head office, which currently employs 400 people, 250 of them in research, would remain as an Adobe research facility. But 200 of the company's 648 workforce could lose their jobs.

"Accelio will be fully integrated within Adobe...the Accelio name will disappear...there is no question there will be layoffs," said Francis, who said he will leave the company once the integration is complete.

Francis said the transaction is expected to close in late March if approved by Accelio shareholders.

Adobe said the acquisition would result in a charge of $12 million to $15 million, would depress fiscal 2002 profit margins by about 1 percentage point, and would create a pro-forma share dilution of about 2 cents. The purchase would boost revenue by $30 million to $35 million in 2002, Adobe said.

Accelio urged shareholders who have already tendered their shares to Open Text to withdraw their shares before February 4, 2002.