Onyx proposes Pivotal acquisition

TORONTO (11/12/2003) - In a move to strengthen its position as the second largest pure play CRM vendor, Onyx Corp. on Wednesday announced its intention to purchase Canadian CRM provider Pivotal Corp., and hopes its offer will win out over a prior bid.

The new bid has caught Vancouver-based Pivotal by surprise, having only been informed of Onyx's intentions Wednesday morning when the proposal was made public. Under the terms of the proposed acquisition, Bellevue, Wash.-based Onyx has offered a 26 percent premium over the Oak Investment Partners LP bid -- which will essentially combine Pivotal and Talsima Corp., a Microsoft Corp.-based e-Service solutions provider in Kirkland, Wash. -- and is structured to provide potential tax deferral benefits to investors, Onyx said.

The previous bid, from Oak, was made in early October.

According to Patrick Angelel, vice-president of product marketing and alliances with Onyx, acquiring Pivotal would increase Onyx's position as a mid-market CRM leader. He said the acquisition makes sense for both companies due to the synergies in both product suites and customer base.

While Onyx boasts brand name corporate clients including American Express Co. and Reuters Group PLC, Pivotal targets the low-end of the mid-market -- an audience Onyx is looking to address.

"We feel this is a superior offer," Angelel told ITWorldCanada.com. "It is a very natural fit. No one is in a better position to deliver better value to Pivotal's shareholders...and customers than Onyx."

The deal would also enable Onyx to better compete across the CRM space against companies such as Siebel Systems Inc. and Microsoft, he added, but said that independent of the Pivotal acquisition, Onyx is in a position of strength with its business.

Still, the proposal has come as a surprise not only to Pivotal, but to one industry analyst as well. Denis Pombriant, vice-president and research director, CRM software with Boston-based Aberdeen Group, said many people were under the impression that the Talisma/Pivotal merger was a done deal. However, he said the Onyx/Pivotal deal does appear to be a better fit.

"It is rather interesting that the two CRM companies are very similar architecturally," he said. "I think it may be that Onyx saw an opportunity to consolidate one of its Microsoft-centric competitors in the market, and bring over a large and compatible customer base from Pivotal into the Onyx orbit. I think this will enable the new company to have greater market presence and market power going forward."

He said it has become "absolutely critical" for companies to be thinking in terms of market presence especially as of late. Despite slight recent growth, the worldwide CRM software market shrunk by 19 per cent from US$3.7 billion last year to $3 billion, according to forecasts made earlier this year by Gartner Inc.

Pivotal is in the midst of getting its board together to review the Onyx proposal and was not prepared to comment on Wednesday's offer. The Oak transaction is still awaiting approval from Pivotal's shareholders. The shareholder vote is set for Nov. 18.

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