CDC Software enters Pivotal sweepstakes
Chinese-controlled CDC Software joins the bidding war to acquire Pivotal, a maker of software for managing customer relationships.
News of the offer comes after Pivotal reported Monday that it had rejected a $58 million all-stock buyout proposal from rival customer relationship management (CRM) applications maker Onyx Software. Pivotal said at that time that it was considering a new unsolicited bid, but would not name the company making the offer. It has now acknowledged that CDC was that bidder.
CDC, which markets application integration software and is headquartered in New Jersey, is a wholly owned subsidiary of Hong Kong-based technology concern Chinadotcom.
Under the terms of the CDC offer, Pivotal shareholders have the option to choose between two proposals, one that awards $2 for each share in the Vancouver-based CRM provider, and another that awards $1 and $1.14 in Chinadotcom shares for each share of Pivotal. The offers total $49.44 million in cash and $52.9 million in cash and Chinadotcom stock, respectively.
CDC's proposal marks the latest chapter in what has become a rapidly heated bidding war for Pivotal, as the Onyx offer was tendered less than one week ago. In October, Pivotal agreed to merge with Talisma in an Oak Investment Partners-financed deal. Pivotal shareholders were scheduled to vote Tuesday to approve the Talisma deal, but Pivotal has asked them to postpone the vote until Friday to give the Pivotal board time to review the new unsolicited proposal.
On Friday, Pivotal's board of directors divulged a number of reasons for rejecting the Onyx offer, including volatility of the company's stock, its inexperience with large mergers, its lack of profits and the pending shareholder litigation against the company.
If Pivotal were to accept either Onyx or CDC's offer, it would be forced to swallow a $1.5 million breakup fee for canceling the deal with Oak Investment Partners. However, as part its proposal, CDC offered to provide Pivotal with $20 million in bridge financing to help relieve any new expenses triggered by its bid.
Talisma, Pivotal and Onyx all specialize in CRM applications for midsize companies, a market that has fallen off dramatically over the last two years and has left many vendors looking for new ways to remain viable. Microsoft's entry to the low end of CRM market has also spurred concern among the industry's smaller vendors regarding the current competitive landscape.
The midmarket consolidation movement mirrors a similar trend in the enterprise CRM space where PeopleSoft recently acquired rival J.D. Edwards, which spurred Oracle to make a hostile takeover bid for PeopleSoft.
CDC said that success in its proposed acquisition of Pivotal would widen its position as a provider of enterprise resource planning (ERP) software, specifically for the manufacturing sector. The company believes Pivotal's array of marketing, sales, service and partner management applications would complement CDC's existing ERP, supply chain management (SCM), human resources and payroll products.
The deal would also extend the company's recent spate of enterprise software acquisitions. Over the last year CDC bought a controlling stake in SCM software maker Industri Matematik International and acquired Ross Systems, an ERP applications provider.
"Our software strategy includes the acquisition of 'best of breed' technologies internationally and introducing them into the Asia market," said Daniel Widdicombe, chief financial officer of Chinadotcom in a statement.
"We believe the timing of this acquisition represents a logical sequence in the progression of CDC Software's strategy of acquiring companies with high margins and recurrent revenue streams in the mission-critical software solutions sectors of ERP, SCM, CRM and business intelligence," Widdicombe said.
CDC reported that it is a business partner of Pivotal in the Asia-Pacific region.
CNET News.com's Alorie Gilbert contributed to this report.