Onyx Shareholders Set to Vote on M2M Acquisition

On August 1, Onyx’s shareholders are set to vote on the pending acquisition of the company by M2M Holdings, a private equity firm jointly owned by Battery Ventures and Thoma Cressey Equity Partners. The deal on the table is an all-cash transaction for US$92 million, or $4.80 per share, and it is one that Onyx’s management sincerely hopes the shareholders will accept — not only because going private represents a clear value to the company, but also because it will not have to further consider a pending tender offer by CDC.

CDC, a Hong Kong-based firm that owns several software products including CRM vendor Pivotal, has been trying to acquire Onyx since the beginning of the year. Its most recent offer, which Onyx has urged shareholders to reject, is the purchase of all the outstanding shares of Onyx for $5.00 per share in cash.

Can It Do It?

One reason Onyx is rejecting CDC’s higher offer is that it is not sure the firm would consummate the deal at those terms or has the cash on hand.

“The offer includes numerous conditions including, among others, a no adverse change condition that is drafted in broad and very general terms and can be applied in CDC’s sole discretion,” Onyx explained in a statement. “By contrast, the definition of “Company Material Adverse Effect” under the M2M Merger Agreement is substantially more specific and limited, and the interpretation of this definition is not within M2M’s sole discretion.

Onyx also points to CDC’s disclosures in its annual report on Form 20-F, filed with the Securities and Exchange Commission (SEC) on June 21, in which CDC states that it has limited ability to transfer or move its cash out of China or to use its cash for the benefit of CDC or its subsidiaries.

The Right Timing

“The big fear is, what if Onyx considers CDC’s offer and the other offer is rescinded in the meantime,” Yankee Group analyst Sheryl Kingstone told CRM Buyer. “And then CDC can’t meet its terms.”

More importantly, M2M provides a better fit for Onyx, Martin Schneider, an enterprise software analyst at the 451 Group, told CRM Buyer. “If Onyx had been a private company, it probably would have been a profitable one this past quarter,” he said, referring to the high regulatory and reporting costs of being public.

Onyx would also be a good fit for CDC, although not necessarily vice versa, he added. “A strong core set of CRM products could be the foundation of a business process management based suite,” he said. “It makes more sense for CDC to go to market, to go up against other strong players, with an offering that is more than just Pivotal.”