Onyx Rejects CDC's Acquisition Proposal
Onyx Software has rejected a proposal from CDC, which owns Pivotal Software, to acquire a majority share of the enterprise CRM vendor, citing lack of synergy between the two companies as the prime reason. CDC's proposal included a capital infusion of $50 million, a double-digit percentage premium for Onyx shareholders, and allowing Onyx to remain a public company. Onyx received the proposal from CDC on December 6, 2005. The parties spoke on December 30, 2005, to discuss the CDC proposal. Based on discussions at that meeting, and on subsequent assessments, Onyx's special committee on its board of directors unanimously rejected the proposal on January 5, 2006.
"We didn't think this deal would add a whole lot of value to our customers and shareholders," says Todd Chambers, CMO of Onyx. "CDC was bringing a whole lot of assets to the table that we thought weren't part of our core business. We felt this would be dilutive to everybody involved, and just didn't make a whole lot of sense."
Onyx cited three more reasons for the rejection: Poor financial performance of CDC's software division (evidenced by lower reported 2005 license revenue growth compared to Onyx); being forced to pay a significant premium for CDC's software division assets; and the fact that Onyx shareholders would receive no cash consideration and would face the prospect of limited liquidity.
"CDC is made up of Pivotal, IMI, which is a supply chain player, and Ross, which is an ERP player. CDC has integrated none of these into a suite. This new entity was going to be made up of all these new pieces, plus Onyx," Chambers says. "Our shareholders were going to walk away being a small, minority owner in CDC, as opposed to being 100 percent owners in Onyx, a company that is doing very well right now."
In a conference call today CDC's acting CEO Steven Chan said the company, with the exception of the phone conversation with Onyx's CEO on December 30, was unable to connect with any of Onyx's board of directors. He urged Onyx to reconsider and said CDC is willing to simplify the proposal if needed to complete the deal. "The deal makes sense for everybody involved: Onyx, ourselves, and the shareholders. For Onyx, size does matter. 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. CDC finds Onyx's dismissive behavior to be surprising and extremely unusual. We are surprised and unhappy at the unwillingness to explore our proposal."
Rob Bois, research director at AMR Research, says the acquisition would have been a sound move for CDC, given that Onyx is strong in verticals that Pivotal is not. "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." Still, Onyx has done a good job recovering from its recent financial slump. It "has righted the ship and is returning to stability and growth."
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