Customer relationship management (CRM) software maker Pivotal Corp.’s board of directors rejected Tuesday a last-minute acquisition proposal from Hong Kong-based Chinadotcom Corp. unit CDC Software, setting Pivotal’s shareholders up for a Friday vote on the takeover scenario the company has been pursuing for the past month – a merger with fellow midmarket software developer Talisma Corp.
CDC went public Tuesday with a bid it presented to Pivotal on Monday, offering Pivotal shareholders a choice of either US$2 in cash or US$2.14 in cash and Chinadotcom shares in exchange for each share of Pivotal. The cash component of the offer is higher than the US$1.78 per-share cash offered by Oak Investment Partners, the investment firm with stakes in both Talisma and Pivotal which is seeking to have the companies merge. [Please see Pivotal receives another bid.]
Despite the cash premium offered by CDC Software, the company’s offer does not represent a better value for Pivotal shareholders and customers because of the significant risks associated with the condition-laden proposal, Pivotal said in a statement on its reasons for rejecting the bid.
CDC’s offer is contingent upon the results of due diligence, some internal Pivotal restructuring and several regulatory approvals, according to Pivotal. It also does not set a time limit on the duration of the companies’ due diligence, opening Pivotal up to the risk of a business downturn while it works toward completion of a deal with CDC, the company said.
Pivotal, based in Vancouver, had several exploratory discussions with CDC in early 2003, but after Pivotal retained a financial advisor and began soliciting bidders, CDC indicated that it was not in a position to make an offer, according to Pivotal. Pivotal had no further communication with CDC about acquisition options until last Friday, when CDC sent Pivotal a letter expressing CDC’s interest in renewing discussions. Talks last weekend between the two companies led to CDC’s Monday offer.
Pivotal reiterated its support for the Talisma/Oak deal, on which shareholders will vote in a meeting this Friday.
Pivotal has been at the centre of an unexpected flurry of last-minute acquisition interest. Onyx Software Corp., another midmarket CRM vendor, submitted an unsolicited stock-swap bid last week for Pivotal, which Pivotal rejected. Both companies sell sales, marketing and customer service software, a market that has been slumping in the past few years, leaving vendors scrambling for options that will keep them afloat.
One Pivotal customer, who spoke on condition of anonymity, said his biggest concern is that Pivotal ends up acquired by a company that will continue to develop Pivotal’s products. His company purchased Pivotal’s CRM software earlier this year. He said he knew at the time Pivotal was struggling financially and could be acquired, but he hoped the company would find a backer that would respect the company’s existing customers.
“We don’t want to be forced to migrate to something else,” he said. “What needs to happen is for them to end up with a partner that will advance the platform.”