CDC Ups the Ante For Onyx, Again

Despite Onyx Software's rejections of CDC's acquisition proposals, and despite Onyx signing a definitive agreement to be acquired by privately held M2M Holdings, CDC isn't ready to back down just yet: It announced on Friday its intent to make an all cash tender offer of $5.00 per Onyx share. The offer price, according to CDC, represents a more than 10.4 percent premium to the value of Onyx's average closing stock price during the past 30 trading days. This offer comes about one week after CDC Software, a wholly owned subsidiary of CDC Corp., announced an offer of $4.85 per Onyx share in cash, or $5.00 per Onyx share ($2.50 in cash and $2.50 in stock), to Onyx shareholders. CDC's initial attempt to nab Onyx came in December 2005 when CDC Corp. made an offer to acquire the majority share of Onyx that included a capital infusion of $50 million, a double-digit percentage premium for Onyx shareholders, and maintaining Onyx's position as a public company. Onyx shot down this offer, citing several reasons, including that Onyx would have to pay for CDC Software division assets. In March CDC Software submitted a tweaked but unsuccessful bid to Onyx's board of directors for $4.57 per Onyx share in cash, or $4.78 per Onyx share in cash and shares. Instead, Onyx on June 6 announced that it had signed a definitive agreement to be acquired by privately held M2M Holdings for an all-cash deal valued at about $92 million, or $4.80 per share. The deal, subject to approval by holders of a majority of Onyx's outstanding common stock, was expected to close in the third calendar quarter of this year. Onyx would become a private company and operate as a separate business unit of Made2Manage Systems, M2M's primary asset. As to be expected, CDC contends that bringing Onyx under its umbrella would be highly complementary, generating substantial synergies and optimizing value for CDC Corp. and Onyx shareholders. Onyx, however, announced on June 22 that its board reaffirms its support of the all cash transaction with M2M, and on June 29 announced that it will hold a special meeting of shareholders to vote on the transaction August 1. "People that have looked under the surface have realized Onyx is a good product, it just has been poorly executed in the field so it makes sense that [CDC] would go for Onyx," says Martin Schneider, enterprise software analyst at The 451 Group. But Schneider contends that CDC's offer is not good for Onyx, because it would still endure the scrutiny of a publicly traded company. "Once they go private they'll be able to operate without any of that kind of scrutiny [of people saying], 'It doesn't matter if their product's good, are they still going to be around?' But when they're private and they've got some good, solid financial backers in M2M...maybe a lot of that stigma will go away." The companies' history with each other extends beyond CDC's interest in acquiring Onyx, and includes CDC Software beating out Onyx to acquire Onyx rival Pivotal. "There's no denying that they have often been in head-to-head competition given the markets that they play in," says Kim Collins, a research vice president at Gartner. "They are in many ways arch enemies if you look at it from the market competitive aspect. They both have at one point seen value in a combined entity, but both want to be the one in the driver's seat." Related articles: CDC Software Is Back With a Higher Bid M2M Holdings Mines Onyx CDC and Onyx: Round Two