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Replies to post #34 on CDC Corp. Class A Common (CDCAQ)
Hong Kong technology developer CDC Corp. (CDCAQ) sued one of its subsidiaries Tuesday to block the acquisition of two companies by a private investment firm, arguing that the sale of these companies would cause CDC Corp. shareholders to "lose substantial value, perhaps irretrievably."
According to documents filed Tuesday with the U.S. Bankruptcy Court in Atlanta, CDC Software Corp. (CDCSY) is seeking to sell two of its subsidiaries, which account for 28% of its annual revenues, to investment firm Marlin Equity Partners for $60 million and has already executed a letter of intent.
The company that owns CDC Software Corp. is a 100% subsidiary of CDC Corp., effectively giving CDC Corp. 98.1% voting power in CDC Software Corp., CDC Corp. said. However, it will take CDC Corp. as long as two months to hold a meeting and exercise its right to remove the board members that voted to approve the letter of intent with Marlin, so CDC Corp. is asking the bankruptcy court to issue an emergency injunction to stop the deal from progressing.
CDC Corp. lawyer Gregory Ellis said he couldn't comment on the pending case but said the case is clearly centered on governance issues and called it "unfortunate that they have to be aired out in the courts."
Monish Bahl, the senior vice president of corporate development for CDC Software Corp., also called the situation unfortunate.
"We just think it's worthwhile to explore all opportunities," Bahl said in an interview Wednesday, adding that the company's goal is "to help our parent get out of bankruptcy."
Bahl said he couldn't comment on whether the company would be canceling their agreement with Marlin but said, "We're going to apply common sense to the situation."
The deal requires CDC Software Corp., which is not a debtor in CDC Corp.'s bankruptcy, to provide up to $300,000 to Marlin to cover expenses, CDC Corp. said in court documents. It's an amount that "is not a prudent use of the limited cash of CDC Software Corporation, and is not consistent with market practices."
CDC Corp. said its financial adviser has advised it that "preservation of the status quo with respect to the debtor's subsidiaries' capital, debt structure, and operations are vital to an orderly and effective reorganization process."
Judge Paul Bonapfel of the U.S. Bankruptcy Court in Atlanta has scheduled a hearing on the injunction on Jan. 24.
CDC Corp. filed for Chapter 11 bankruptcy protection on Oct. 4 with $377.4 million in assets and $250.2 million in liabilities. The company announced in November that it had received notice from Nasdaq that it was being delisted for not filing its 2010 annual financial report, but the hearing is still pending.
