Pivotal's board rejects Onyx

In a surprise twist, Pivotal said it now evaluating another "highly conditional" offer for the company.

The board of directors at Pivotal Corp. is recommending that shareholders reject Onyx Software Corp.'s unsolicited

takeover and said it is now considering another offer to acquire the company.

The board cited several reasons for opting against the Onyx offer, notably its midmarket CRM rival's financial health. Executives at Vancouver, British Columbia-based Pivotal mentioned the "volatility and relative illiquidity" of Onyx stock, Onyx's lack of experience with larger acquisitions and its "limited access to capital."

Onyx issued a release this morning vowing to pursue the takeover.

Pivotal has not provided details on the latest offer to buy the company, calling it a "highly conditional proposal."

"We're not allowed to say [more] as a condition of the offer," Pivotal CEO Bo Manning told SearchCRM.com.

Last week Onyx made an all-stock play for Pivotal, offering 0.475 shares of Onyx for each Pivotal share. The proposal came one month after Pivotal had accepted a $48 million cash bid from private equity firm Oak Investment Partners. Oak intended to merge Pivotal with e-service software firm Talisma Inc., though its deal is still subject to Pivotal shareholder approval.

Investors are scheduled to vote on the Talisma merger tomorrow, but Pivotal said it will postpone that vote until Friday. In the meantime, a special committee set up to evaluate acquisition offers will weigh this latest proposal from the unnamed suitor, Manning said.

If investors ultimately opt for Onyx, the Bellevue, Wash.-headquartered vendor plans to merge the two midmarket product lines and promises the combined company would benefit from significant cost synergies. It would also become the second largest pure-play CRM vendor behind Siebel Systems Inc.

In making its recommendation, Pivotal's board said it had received "a number of strong and unsolicited expressions" of customer concern. It also said overlaps in Pivotal and Onyx offerings would result in "few cross-selling revenue synergies" and higher support costs.

"[Onyx] is a company that could go through this process and, in the end, say it doesn't want to do a deal -- with no harm to them and huge harm to us," Manning said.

Patrick Angelel, Onyx vice president of marketing and alliances, said the company didn't go to "all this effort just to scuttle Pivotal's plans." While committed to the deal, Angelel added that Onyx is "in a position to thrive on our own should this acquisition not materialize."

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