Congratulations CDC, it’s a CRM company. The bidding war that started two months ago for Vancouver-based CRM software company Pivotal Corp. came to a crashing halt on Sunday when the company announced that it has accepted the bid from CDC Software Corp., making the Hong Kong-based company the proud new owner of Pivotal.
Pivotal turned down a bid from Oak Investment Partners and an unsolicited acquisition offer from Onyx Software Corp. before making CDC — a division of Chinadotcom Corp. — the big winner.
According to Pivotal, the deal will have CDC acquiring all of its outstanding shares. Pivotal shareholders will receive either US$2.14 — US$1.00 cash plus US$1.14 of common shares of Chinadotcom — or US$2.00 in cash.
After accepting CDC’s bid, Pivotal was given a US$2-million loan from Chinadotcom used to pay for business transactions including working capital requirements, Pivotal said.
Initially, the CDC bid was rejected by Pivotal despite the cash premium offered. Pivotal went on the record to say that CDC’s offer did not represent a better value for Pivotal shareholders and customers because of the significant risks associated with the condition-laden proposal. However, CDC offered to speed up its own due diligence process and Pivotal agreed to negotiations with the company.
Following the completion of the transaction, Pivotal said the “strategic combination” will allow it to grow in areas such as technical support where it will increase employment by up to 40 per cent, resuming the expansion of its research and development department and resuming its acquisition program.
According to Pivotal, the company will operate as a distinct business unit within CDC software and will focus on its traditional method of offering CRM software to the midsized enterprises globally.
According to a statement released last month, Pivotal rejected the Onyx bid, which proposed a 26 per cent premium over an October offer made by Oak Investment Partners. Oak, an investment firm, planned to essentially combine Pivotal and Talisma Corp., a Microsoft Corp.-based e-service solutions provider in Kirkland, Wash.
Pivotal cited the volatility and relative illiquidity of Onyx stock, the underperformance of Onyx share prices during the last 12 months, as well as outstanding Onyx litigations and the company’s history of small acquisitions and inexperience in completing large transactions, as other key influences on its decision.
In a statement released on Sunday, Pivotal explained that under the terms of the company’s agreement with Oak Investment Partners, the firm had the right to match Chinadotcom’s offer, but declined.
Part of the US$2 million Pivotal received from CDC will pay a US$1.5 million break fee to Talisma, as per the agreement the companies had in place.
Karen Smith, a research director with Boston-based Aberdeen Group, said that “both Pivotal and Onyx needed to do something in order to survive and keep the market from slipping away from them.”
She added that the CDC acquisition gives Pivotal new opportunities and financial backing — especially to target emerging Asian markets and powerhouse global enterprise buyers of CRM.
Smith noted that although this acquisition will be good for Pivotal, the company will have to be on guard against its competitors, which are rapidly approaching Pivotal’s “sweet spot.”
“PeopleSoft, SAP and Siebel are strong enterprise players moving downstream into Pivotal’s sweet spot and Microsoft CRM, Best Software CRM and Salesforce.com are moving upstream,” she said. “As the enterprise players move down and the SMB players move up, Pivotal and Onyx risk being pushed aside.”
The acquisition is subject to the approval of Pivotal’s shareholders and the Supreme Court of British Columbia. Both companies expect the closing of the transaction to take place in February 2004.