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Unfazed by Rejection, CDC Makes Third Bid for Onyx

By Erika Morphy
Jun 21, 2006 8:16 AM PT

CDC Software has made its third offer to acquire mid-market CRM vendor Onyx, offering shareholders a choice of all-cash or cash-and-shares in CDC.

Unfazed by Rejection, CDC Makes Third Bid for Onyx

The offer -- US$4.85 per share in cash, or $2.50 in cash and $2.50 in CDC stock -- comes a few weeks after Onyx signed a definitive agreement to be acquired by M2M Holdings, a private equity firm jointly owned by Battery Ventures VI and Thoma Cressey Equity Partners, in an all-cash transaction for $92 million, or $4.80 per share.

Persistent Suitor

CDC is nothing if not persistent. The company has tried to acquire Onyx twice this year and was spurned on both occasions.

The first offer made little financial sense for Onyx, Yankee Group analyst Sheryl Kingstone told CRM Buyer. The second offer's numbers were more appealing, she said, but Onyx still resisted acquisition by a company that has also swallowed its one-time chief competitor, Pivotal.

The main allure for the M2M deal, Kingstone said, is the fact that it is a private company. The pressure of making -- or, as the case has been recently, not making -- its earnings every quarter would be off under the M2M umbrella and allow Onyx to concentrate on building out its market share.

Other reasons for spurning CDC have to do with the perception in some quarters -- including, apparently, at Onyx -- that CDC has not done much to cultivate Pivotal.

An Active Period

It is not surprising that CDC -- whose actions invite the inevitable comparison to a spurned suitor who cannot accept the fact that his beloved is not interested -- continues to focus on wooing Onyx into its fold.

The Hong Kong-based company has been building out its software portfolio over the last six months, acquiring Microsoft partner c360 Software company, a provider of CRM add-on products, industry-specific applications and development tools for Microsoft Dynamics CRM, and subsequently building out its ties with Microsoft.

Onyx, though, offers complementary CRM capabilities that neither Pivotal nor c360 have been able to provide, particularly in such industry verticals as insurance and government.

"This potential combination harbors benefits for both shareholders and customers of Onyx, including complementary industry specialization, products, geographic markets, sales channels and marketing strategies," said Eric Musser, executive vice president of strategy, mergers and acquisitions for CDC Software.

As with most acquisitions, Onyx's maintenance revenues also would be a plus for CDC.

Nevertheless, given Onyx's near knee-jerk refusals of the previous offers, and given the fact that it is enthusiastically supporting M2M's bid, it is unlikely that three times will be the charm for CDC.


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