Onyx Makes Bid for Pivotal

Following Oak Investment Partners' announcement last month of its intention to purchase Pivotal, Onyx makes an unsolicited bid to buy the midmarket CRM company.

Longtime midmarket CRM software rivals Onyx Software Corp. and Pivotal Corp. could join forces after Onyx announced Wednesday an unsolicited bid to buy Pivotal.

Private investment company Oak Investment Partners had announced last month its intention to buy Pivotal and merge it with another midmarket CRM software developer, Talisma Corp. That cash deal would have been worth up to $1.81 per share of Pivotal.

Onyxs bid, a stock-for-stock deal, would pay $2.25 a share for Pivotal. Pivotals stock price closed at $1.76 a share Tuesday and is up to $2.01 a share today on the news. The deal would give Pivotal shareholders 0.475 shares of Onyx common stock for each common share of Pivotal they own. The deal values Pivotal at approximately $59 million.

The bid comes just six days before Pivotal stockholders were due to vote on Oak Investment Partners bid. Pivotal will have to pay a $1.5 million breakup fee to Oak Investment Partners if that deal does not go through.

Onyx officials said the combined company would have more than 2,600 customers and $110 million in annual revenues.

Onyx CEO Brent Frei said the company is just making its bid now after completing its due diligence once Pivotal filed its 8K form with the SEC on Oaks bid Oct. 21. He said Onyx and Pivotal have talked about merging in the past.

"Weve never been able to work out a deal in the past," Frei said. "One of us would be overvalued, another would be in financial distress."

Frei said Onyx is now in a stronger financial position to pull off the deal. There are "incredible synergies" between the two companies, he said. Both have built their products on Microsoft Corp.s .Net architecture and sell to the midmarket. Both companies are based in the Pacific Northwest, with Onyx in Bellevue, Wash., and Pivotal in Vancouver, British Columbia.

"We would continue to support their current product and build anything Pivotal has thats not represented in our offerings into the combined product," Frei said.

Much of Pivotals installed base is still on the companys client/server products and will have to move to Web-based products eventually anyway, he said.

Frei contended that Onyxs bid is better for Pivotal shareholders, customers and employees since Oak Investment Partners is a financial holding company looking for a quick return on its investment.

"I suspect the [Pivotal] board will do their fiduciary duty and support our offering," he said. "Its not only a superior financial offering, but its an opportunity for them to defer their tax liabilities and an opportunity to show the upside of the combined companies. Its quite a compelling offer.

"There really isnt a better place for Pivotal to go than Onyx."

Frei said he had not yet discussed Onyxs bid with anyone at Pivotal. Pivotal officials could not be reached for comment.