Onyx Rejects CDC's Unsolicited Tender Offer and Reaffirms M2M Transaction
17 Juli 2006 - 11:37PM
Business Wire
Onyx Software Corporation (Nasdaq:ONXS) today announced that its
board of directors voted to recommend that shareholders reject CDC
Corporation's unsolicited offer to purchase all of the outstanding
shares of Onyx for $5.00 per share in cash. After careful
consideration, including a detailed review of the terms and
conditions of the Offer with Onyx's board of directors' financial
and legal advisors, the board determined at a meeting on July 15,
2006, that the uncertainties inherent in the Offer represent a
substantial threat to shareholder value that is not offset by the
small premium reflected by the CDC offer price. In making its
recommendation, the board of directors consulted with management
and its financial and legal advisors, and took into account
numerous factors including, but not limited to, the following: --
Consummation of the Offer Is Highly Uncertain, as the Offer Is
Subject to Extensive Conditions to Be Applied in CDC's Sole
Discretion. The Offer includes numerous conditions including, among
others, a no adverse change condition that is drafted in broad and
very general terms and can be applied in CDC's sole discretion. By
contrast, the definition of "Company Material Adverse Effect" under
the M2M Merger Agreement is substantially more specific and
limited, and the interpretation of this definition is not within
M2M's sole discretion. As a result, consummation of the CDC Offer
is much less certain than consummation of the M2M transaction,
which is currently scheduled to close on August 1, 2006. -- It is
Unclear Whether CDC Has Available Cash or Sufficient Liquidity to
Consummate the Offer. CDC states, without detail or explanation,
that it has sufficient cash on hand to consummate the Offer and pay
the associated expenses. This statement, however, appears to
directly contradict CDC's own disclosures in its annual report on
Form 20-F, filed with the Securities and Exchange Commission (SEC)
on June 21, 2006, in which CDC states that it has limited ability
to transfer or move its cash out of China or to use its cash for
the benefit of CDC Corporation or its subsidiaries, such as the
Offeror under the tender offer. -- CDC's Recent Market Trading
Activity in Onyx Common Stock Causes Onyx to Question CDC's
Intention to Consummate a Merger. CDC disclosed in the Schedule TO
that, beginning on June 7, 2006, and continuing through June 21,
2006, it sold 223,200 shares of Onyx common stock in 16 separate
transactions at prices ranging from $4.68 to $4.80, all of which
are below the $5.00 price stated in the Offer and the $4.85 price
reflected in its earlier announcement on June 20, 2006. Six of
these sales, for a total of 56,000 shares, took place after CDC's
public announcement on June 20, 2006, that it desired to purchase
Onyx for a consideration of $4.85 per share in cash or $5.00 per
share in cash and CDC stock. Selling Onyx common stock at prices
lower than the price to be paid by CDC through its purported Offer,
particularly when combined with CDC's past inconsistent and
nonresponsive statements and behavior with respect to Onyx, as
detailed above, is inconsistent with the stated intention to
acquire Onyx at $5.00 per share. -- The Regulatory Clearances
Needed to Consummate the Merger Are Uncertain and May Not Be
Obtainable in a Timely Fashion. Consummation of any transaction
with CDC would require expiration or termination of applicable
waiting periods under the HSR Act. As of the date of this press
release, to Onyx's knowledge, CDC had not yet made any filing under
the HSR Act. In addition, CDC does not specify in the Schedule TO
the regulatory clearances that would be required from jurisdictions
outside the United States in order to complete the transaction. As
a result, the time period for satisfaction of any regulatory
conditions is uncertain. In addition, the ability to obtain such
regulatory clearances is not assured. -- The Availability of
Meaningful Remedies Against CDC for a Breach of Contract Is
Uncertain. The Offeror is a shell company owned by CDC, a Cayman
Islands company with a substantial portion of its assets outside
the United States and a majority of its directors and officers
being nationals and/or residents of countries other than the United
States. CDC itself states in its annual report on Form 20-F, filed
with the SEC on June 21, 2006, that U.S. persons may have limited
ability to enforce civil liabilities against CDC. -- There Is No
Certainty That Any Discussions With CDC Would Result in a Signed
Acquisition Agreement. Although CDC has stated an interest in a
negotiated transaction, CDC has not stated any proposed timeline
under which it would be able to execute a negotiated transaction.
CDC also has not expressed any willingness to enter into a
definitive merger agreement on terms substantially similar to, or
more favorable to Onyx than, those reflected in the M2M Merger
Agreement, which has been publicly available since June 6, 2006.
Nor has CDC stated that it would enter into a confidentiality
agreement with Onyx on terms that are no less favorable to Onyx
than the confidentiality agreement Onyx has with M2M, which is
required under the terms of the M2M Merger Agreement before Onyx
could enter into discussions with CDC. -- There Is No Guarantee
That CDC Will Be Offering the Same Price at the End of an
Indeterminate Negotiation and Due Diligence Process Involved in a
Negotiated Transaction. There is no guarantee that CDC will be
offering the same price at the end of the indeterminate negotiation
period that it proposes. In the event that Onyx shareholders do not
approve the M2M merger at the special meeting on August 1, 2006,
(or any adjournment thereof), M2M would have the right to terminate
the M2M Merger Agreement. Any termination of the M2M Merger
Agreement could materially adversely affect the price of Onyx
common stock, which could lead CDC to reduce the price of the
Offer. -- There Is No Certainty That a Negotiated Transaction With
CDC Could Be Consummated in a Timely Fashion. Although CDC publicly
announced its intention to launch the Offer on June 30, 2006, it
did not actually commence the Offer until 12 days later on July 12,
2006, notwithstanding the pending special meeting to consider the
M2M merger scheduled for August 1, 2006. In addition, as of the
date of this release, to Onyx's knowledge, CDC had not yet
completed any filing under the HSR Act, which would be necessary to
consummate any transaction with CDC. These delays, combined with
CDC's previous behavior, suggest that CDC may be unable or
unwilling to move quickly to consummate a transaction with Onyx in
a timely fashion. The Onyx board also determined that, in light of
the $5.00 per share purchase price in the conditional Offer from
CDC and CDC's stated willingness to negotiate with Onyx toward a
binding definitive agreement, the board's fiduciary obligations to
Onyx shareholders require that it attempt to engage with CDC,
consistent with the restrictions under the M2M Merger Agreement.
Accordingly, the board made the requisite determination under the
M2M Merger Agreement to engage in discussions with CDC. In the
meantime, Onyx continues to believe that the $4.80 cash per share
to be paid to Onyx shareholders pursuant to the definitive merger
agreement with M2M represents a superior transaction for Onyx
shareholders when compared with the highly contingent tender offer
made by CDC. Absent further developments resulting from discussions
with CDC, Onyx intends to continue to work to close the transaction
promptly following the special meeting on August 1, 2006.
Additional Information About the Proposed Transaction and Where to
Find It In connection with the proposed transaction, on June 29,
2006 Onyx filed a definitive proxy statement with the SEC and on
July 17, 2006, Onyx filed a Schedule 14d-9 recommendation statement
with the SEC. Investors and security holders are advised to read
the definitive proxy statement, the Schedule 14d-9 recommendation
statement and any other relevant documents filed with the SEC
because they contain important information about the proposed
transaction with M2M, the CDC tender offer and Onyx. Investors and
security holders may obtain a free copy of the definitive proxy
statement, the Schedule 14d-9 recommendation statement and other
documents filed by Onyx from the SEC Web site at www.sec.gov.
Onyx's directors and executive officers may be deemed to be
participants in the solicitation of proxies from the shareholders
of Onyx in connection with the proposed transaction with M2M. A
description of certain of the interests of directors and executive
officers of Onyx is set forth in the definitive proxy statement.
Onyx is a registered trademark of Onyx Software Corporation in the
United States and other countries. Other product or service names
mentioned herein are the trademarks of their respective owners.
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