Finally, after three years of simmering, the idea to spin off CDC Software Corp. from its parent, CDC Corp., is ready for tasting. The enterprise software company this week expects to offer 4 million shares in an initial public offering that it hopes will raise roughly $43.4 million.
“We are expecting to price this week,” a spokeswoman for the company said in an e-mail to Managing Automation today. The company plans to use the money raised for working capital, she said.
CDC Software estimates the share price to range from $11 to $13. The American depositary shares (ADSs), representing newly issued Class A ordinary shares, have been approved for listing on the NASDAQ Global Market under the symbol CDCS.
In addition to the 4 million shares from CDC Software itself, CDC Software International Corp., the direct parent of CDC Software and a subsidiary of CDC Corp., will offer 800,000 shares of CDC Software, to raise an estimated $8.7 million. Those proceeds, however, will not go to the spun-off entity, according to a company announcement. After the offering, CDC Software International will continue to hold Class B ordinary shares, which carry 10 times the voting power of the Class A shares. This arrangement would mean that CDC Corp., through CDC Software International, would wield 98.1% of the voting interests and an 83.4% equity interest in the company after the offering.
“The planned IPO is part of our previously announced strategic initiatives to focus CDC Software as a pure-play enterprise software company,” said Peter Yip, CEO of CDC Software and CDC Corp., in a prepared statement. “We also believe that the IPO helps to provide CDC Software with its own currency to help strengthen its acquisition strategy so it can continue to build out its enterprise applications and services platform, and enables the company to expand into other vertical and high-growth emerging markets, such as in India and China.”
The parent corporation is based in China, but CDC Software has sold its products mainly in developed markets such as the United States and Europe.
CDC has been following a growth-by-acquisition course and Yip told analysts in May, at the time of the company’s first-quarter financial statement, that it has formed a pipeline of acquisition targets. In that quarter alone, the company had agreed to acquire privately held manufacturing intelligence provider Informance International, and U.K.-based Categoric, a provider of supply chain event management and business activity monitoring software. More recently, CDC announced a joint venture with Softrax Corp., a provider of billing and revenue management software.
While a $43.4 million return from the IPO might be regarded as a windfall in the current economic climate, it is just over half the amount originally cited in documents filed with the U.S. Securities and Exchange Commission as late as May 2009. MA has been reporting on the planned spin-off of the Atlanta-based company from its Chinese parent since May 2006.
In its most recently reported quarter, ended March 31, CDC Software reported a 17% decline in revenue, to $50.5 million.
Lazard Capital Markets and JMP Securities are underwriting the IPO.