Blackboard To Be Acquired by Private Equity Firm

• By Dian Schaffhauser
• 07/01/11

Blackboard reported it's being acquired by a private equity firm with a big stake in the education market. As a result of the deal, which is expected to be completed in the fourth quarter of 2011, the publicly traded company will become privately held. But, according to the company, the proposed transaction shouldn't affect day to day dealings with customers, nor contracts, nor pricing, nor the long-term roadmap for Blackboard's products and services. Approval of the deal is subject to shareholder approval and regulatory review.

Providence Equity Partners will pay about $1.64 billion in cash to stockholders for their shares in the learning management company. That's $45 per share, a 21 percent premium over the closing price of $37.16 per share April 18, 2011, the day before Blackboard announced to investors that it was evaluating "strategic alternatives," a common phrase used when a company is looking to be bought.

"Will there be sudden changes to policy, pricing, or strategy? It is our plan that the key strategies that brought us here will continue to guide our path," wrote Ray Henderson, president of Blackboard's teaching and learning division, in a blog post today. "Critical to our success in recent years has been our focus on Blackboard's performance on the fundamentals, sustaining the steady improvements we're making in support responsiveness, openness, transparency, and quality. I envision no change in our underlying commitment to these fundamentals. And I'll reassure you that we expect our pricing practices to remain within historical norms for the foreseeable future.

He added that although the two parties haven't yet had a chance to "fully explore alignment of our ideas," he believes Providence "shares our vision of improving the education experience for our clients, and of the mission critical role our platforms and services play in teaching and learning today."

At the same time, Henderson pointed out, the company's board of directors had to "balance the interests of both our clients and investors."

The hunt for a buyer apparently began in March 2011, when Blackboard's board formed a "Transaction Committee" to conduct discussions with potential buyers, both strategic and financial. When Providence closed in with its offer, the board unanimously approved the transaction and recommended that its stockholders--many of which are sizable institutional investors--do the same.

"This compelling transaction is the result of a comprehensive evaluation of our strategic alternatives, and we firmly believe it delivers significant value to all Blackboard stockholders," said Michael Chasen, Blackboard's president and CEO, in a statement. "In Providence, we will have a partner who brings a deep understanding of the international education marketplace and shares our vision of providing educators with exceptional technology solutions, and services to meet their evolving needs over the long-term. We look forward to welcoming Providence to the Blackboard team."

According to a frequently asked questions document on Blackboard's Web site, Chasen will remain as CEO, and other members of the executive team will also stay in place. "There are no anticipated changes with personnel or company operations," the FAQ stated.

Who is Providence Equity Partners? The company has been in operation since 1989. In the intervening years, its Web site boasts, it has been involved in investments in "more than 100 companies," in segments that besides education also include media, communications, and information. Its interests are as varied in North America as AutoTrader.com, Warner Music Group, Yankees Entertainment, and Sports Network. It presently manages a capital fund of about $23 billion, which also extends into Europe and Asia.

The group's education investments currently include:

• Archipelago Learning, a subscription service that provides Web-based study products for K-12 students in the United States, Canada, and the United Kingdom;
• Ascend Learning, a network of three urban charter schools in the New York City area;
• Catalpa, a Dutch childcare services firm, acquired by Providence in 2010;
• Edline, a Chicago-based software company that offers online course management system and communication services;
• Education Management, which runs for-profit post-secondary institutions, including Argosy University and Brown Mackie College, both with numerous locations; Providence along other major investors acquired the company in 2006; and
• Study Group, which runs 41 centers worldwide to help international students transition into the universities they're attending; Study Group was acquired by Providence in 2010.

Providence also has investments in CDW and SunGard, both of which have major interests in the education market.

"We are very familiar with Blackboard through our extensive education investments over the years and have tremendous respect for what the Blackboard team has accomplished," said Peter Wilde, a managing director at Providence. "Given its exceptional brand, technologies, client base, and the depth of its team, we believe Blackboard will continue to drive and benefit from the increasing penetration of digital technologies and content in schools around the world. We are excited to put our resources and hands-on experience in the education and communications sectors toward supporting Blackboard's growth over the long-term."