The enterprise software vendor might be talking acquisition, but miscommunication has marred early efforts.
Posted Dec 29, 2005
CDC, which owns Pivotal Software, has announced an offer to acquire a majority share of Onyx Software. Onyx officials say the offer is under consideration, despite written complaints by CDC that it was being ignored. Varying characterizations of Onyx's financial health and the relationship between the two vendors have left the industry wondering if a fight's brewing.
CDC's proposal includes a capital infusion of $50 million, a double-digit percentage premium for Onyx shareholders, and allowing Onyx to remain a public company. The tone indicated a hostile move, as Wednesday's press release stated CDC had been unable to have a direct meeting with Onyx's management to discuss the issue. "We have been working directly and through intermediaries to commence a one-on-one dialogue for several months, and have been frustrated with our inability to liaise directly with Onyx's management and board," Steven Chan, CDC's acting CEO, said in the statement. "Given the dynamic industry, the window of opportunity, however, will not last long, and we will carefully weigh the alternatives in light of the reception we receive from Onyx."
Wednesday evening Onyx responded by saying it would consider the proposal as it would any other opportunity. "Onyx received CDC's unsolicited proposal on Dec. 6, 2005 and a meeting had been scheduled to discuss this proposal. Onyx remains committed to gather all information necessary in order for Onyx's board to determine the best interests of Onyx shareholders," according to a written statement. The date conflicts with CDC's claim of several months, with discussions reaching back as far as six months previous.
Analysts expressed interest and surprise at the public spat. "It's a little uncommon to see a press release like that," says Rob Bois, research director at AMR Research. "The only precedent is the Oracle/PeopleSoft deal from a year ago, when PeopleSoft felt Oracle was being unresponsive. Clearly there's a communication issue here."
A takeover would be a sound move for CDC on both strategic and product grounds, Bois says. "Onyx has righted the ship and is returning to stability and growth. It would make sense, both in terms of synergy among their products and verticals, and as a means of CDC gaining market share and removing a competitor. Onyx is strong in government, insurance, and healthcare, Pivotal in construction, manufacturing, and finance."
Bois also notes that this is not the first time CDC and Onyx have been on opposite sides of an issue. In November 2003 the two companies were each bidding for Pivotal, which eventually was acquired by CDC. This is further evidence that a merger could be beneficial. However, the deal could die a quick death. "Onyx says they have a poison pill in place, though I haven't seen it yet," Bois says. "It seems like an extreme method, but it could happen."
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