Pivotal Says 'I Do' to CDC

Pivotal on Monday released word that it entered a definitive agreement to be acquired by Chinadotcom subsidiary CDC Software. The news came exactly one week after Pivotal's board said it viewed CDC's offer as "superior",and 10 days after Pivotal initially rejected CDC's bid.

Under the agreement, CDC will acquire all outstanding shares of publicly traded Pivotal, Vancouver, British Columbia. Pivotal shareholders can choose to receive either $2 a share in cash or $1 in cash plus $1.14 worth of Chinadotcom shares.

Pivotal said this cash-plus-stock payout would not occur if Chinadotcom cannot furnish all of the information needed in time for Pivotal's proxy statement or if Chinadotcom experiences "a material adverse change."

Bo Manning, Pivotal's president and CEO, described the chance of either contingency as "slight." Manning said the definitive agreement contractually obligates both companies "to go forward and execute the deal."

Pivotal canceled a shareholders meeting that had been scheduled for Monday to vote on a bid from the CRM provider's previous suitor, Oak Investment Partners. Earlier, Pivotal had agreed to be acquired by the venture capital firm for $1.78 a share. Oak planned to then merge Pivotal's operations with those of its portfolio company, Talisma, which provides software to help serve customers online. Pivotal now must pay Talisma a $1.5 million fee for breaking that agreement.

Pivotal's board last month declined a third offer from CRM competitor Onyx Software for a stock and cash transaction valued at $2.25 a share. Pivotal's reasons for that rejection included the "volatility and relative illiquidity of Onyx stock." Onyx last week withdrew its bid to acquire Pivotal. It also fired off a shot at Pivotal, offering Pivotal customers a one-to-one trade of the latest version of Onyx software for each Pivotal license.

Manning quickly returned the salvo. "As a stand-alone, we were more in the mode of cash conservation,as were many of our competitors, like Onyx. Now [we] can go into growth mode and make the types of strategic investments we need to increase our long-term revenues and profitability. We believe neither [Onyx's] employees, customers or prospects can continue to invest their careers or their companies in a [vendor] in that kind of financial shape."

Pivotal announced that, following the close of the acquisition, it will ramp up growth-related spending. This will include increasing its technical support staff by up to 40 percent, making new hires for its R&D organization, expanding distribution in Asia and increasing marketing spending by up to 200 percent.

Manning said Pivotal will continue to address all major regions in all major industries, but will also offer software with a vertical focus, initially for the financial services, health-care, home-building and medical-device industries. Additional industries will be announced next year.

"We will continue to add partners, both internationally and in North America," said Manning. "In North America especially, as we build more vertical applications, we will give extra attention around recruiting and building partnerships."

In addition to Pivotal, Chinadotcom also recently acquired supply chain software company Industri Matematik International, enterprise software supplier Ross Systems and the financial performance software business of CIP-Global.

The acquisition of Pivotal is expected to close by the end of February.