CDC and Onyx: Round Two

Chinadotcom (CDC) on Tuesday announced its CDC Software subsidiary had presented a new takeover proposal to the board of directors of Onyx Software. The offer comes nearly two months after CDC's first offer was rejected by Onyx, and includes options of cash or cash-plus-shares payouts for Onyx shareholders. Specifically, the proposal would allow each Onyx shareholder to choose either $4.57 cash per Onyx share, or a 50/50 mix of cash and CDC Class A common shares with a total value of $4.78 per Onyx share. According to CDC, the $4.78 amount represents a 25 percent premium over recent Onyx five-day market averages. John Clough, chairman of the executive committee for CDC and vice chairman of CDC Software, issued a statement along with the renewed bid announcement suggesting that the companies were natural partners, better together than apart. "CDC Software continues to believe in the benefits of a combination, particularly its Pivotal CRM division, with Onyx. The benefits to shareholders and customers are clear and substantial, and include complementary industry specialization, products, geographic markets, sales channels, and marketing strategies," Clough states. "On virtually parallel paths, Onyx and Pivotal pioneered the mid-enterprise CRM markets and by joining forces, we have the opportunity to become an even more significant force in the industry." Clough adds the new proposal "demonstrates our flexibility and was developed in direct response to requests we received from some of Onyx's shareholders. We are confident that the Onyx board and shareholders will see the mutual benefits." The relationship between Onyx and CDC, the parent company of CRM platform vendor Pivotal, has not been a smooth one. The companies engaged in some light sniping surrounding the first offer, with CDC claiming it had been in discussion with Onyx for three to six months prior to submitting the bid on December 6, 2005. When CDC acting CEO Steven Chan released a statement claiming his company had been "frustrated with our inability to liaise directly with Onyx's management and board," Onyx responded that its first knowledge of a takeover attempt was the unsolicited offer, and a meeting had been scheduled to discuss it. Onyx CMO Todd Chambers issued a statement on January 5, 2006, rejecting the initial proposal. Among several reasons, Chambers cited poor financial performance and integration of existing assets by CDC, "limited synergies between the Onyx and CDC product lines," and deficiencies in the offer itself. Chambers stated the proposed merger would be "highly dilutive to current Onyx shareholders," and that said shareholders "would receive no cash consideration and would face the prospect of limited liquidity." Upon issue of the Onyx rejection, Chan fired back with a statement of his own. "Whether Onyx wants to admit it or not, being a small-scale, single-product, company is not the place to be in today's market," Chan stated. "CDC finds Onyx's dismissive behavior to be surprising and extremely unusual. We are surprised and unhappy at the unwillingness to explore our proposal." Related articles: Onyx Rejects CDC's Acquisition Proposal Onyx Is Pivotal's Quarry