CDC pulls Onyx bid, buys hosted SCM developer

The move ends the prospect of a drawn-out fight for control of Onyx

Hong Kong software maker CDC Corp. is withdrawing its bid for a majority stake in CRM software developer Onyx Software Corp., ending the specter of a drawn-out struggle for control of Onyx.

Onyx's board announced two weeks ago that it was rejecting CDC's offer, but CDC followed that rejection by advertising its interest in talking directly with Onyx's major shareholders about its proposal to merge its software holdings with Onyx's. CDC has in the past proved a persistent suitor: Last year, it acquired Onyx rival Pivotal through a process that began with an unsolicited bid that Pivotal initially rejected. After further negotiations, Pivotal eventually acceded to CDC's overtures and agreed to the takeover.

CDC said on Friday that it will discontinue its attempts to win over Onyx's board. The company cited Onyx's resistance to further discussions and Onyx's climbing share price as factors in that decision. Onyx's shares have steadily risen since CDC went public with its offer in late December. The stock ended trading on Thursday on the Nasdaq stock exchange at $4.79 per share, up 27% from its closing price the day before CDC announced its interest in Onyx. In late trading Friday, Onyx's share price had fallen 16%, to $4.03.

The financial details of CDC's bid had not been firmed up or fully disclosed, but the company initially said it would pay up to $50 million in cash for a majority stake in Onyx.

A tight climate has hurt sales at many makers of enterprise applications and sparked a wave of industry consolidation. In the current environment, CDC is confident that it can find willing targets for acquisitions, CDC's acting CEO, Steven Chan, said in a written statement.

To underline that point, CDC separately announced Friday its agreement to acquire JRG Software Inc. for an undisclosed sum. JRG is a San Mateo, Calif., company that sells hosted supply chain management software targeted at manufacturers of packaged goods.

A spokeswoman for Onyx, which is based in Bellevue, Wash., said the company considered the CDC issue closed weeks ago when the company's board voted down CDC's offer. Onyx said at the time that it is not seeking a sale of the company and that its management is confident shareholders will be well served by allowing Onyx to continue operating independently.

Like many other software companies, Onyx has struggled for profitability. Its revenue had been declining and it had posted net losses for several years. For the first nine months of 2005 (the most recent period for which Onyx's financial results are available), however, the company had remained in the black, with net income of $735,000 on revenue of $12.5 million, a 30% increase over its revenue for the same period in 2004.

Copyright © 2006 IDG Communications, Inc.

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