Providence Equity Partners Inc. agreed to buy Blackboard Inc., an education-software maker, for $1.64 billion to expand in university course materials.
Providence will pay $45 a share in cash, a 21 percent premium over Blackboard’s closing price on April 18, the last day of trading before the software maker said it would consider strategic alternatives, the companies said in a statement today.
With the deal, Providence adds to a for-profit education portfolio that includes college operator Education Management Corp. and English language specialist Study Group Pty Ltd. Blackboard’s software for online course materials and class discussions will help Providence profit from a surge in Web-based education, said Sterling Auty, an analyst with JPMorgan Chase & Co. in New York.
“It’s the portfolio of technologies that Blackboard has built and acquired that makes them so attractive across online learning, mobile access to learning resources, distance learning, as well as tools to help schools communicate to their students,” Auty said in a telephone interview today.
By 2015 about 3.5 million students will take at least 80 percent of their courses online in the U.S, according to Eduventures Inc., a Boston-based higher education research firm. That compares with 2 million students in 2009.
Washington-based Blackboard has expanded offerings to include online and mobile learning platform Blackboard Collaborate and Blackboard Transact, a payment product that allows college students to use their identification cards for purchases on and off campus.
“Providence is getting a good asset at a time when the market wasn’t giving Blackboard a lot of credit for its ability to grow in the future,” said Brandon Dobell, an analyst at William Blair & Co. in Chicago.
Since April, when Blackboard said it was working with Barclays Capital to review unsolicited buyout offers, the company considered bids from Providence and Hellman & Friedman LLC, a person familiar with the matter said last month.
The deal is “the result of a comprehensive evaluation of our strategic alternatives,” said Michael Chasen, Blackboard’s president and chief executive officer, in the statement.
Blackboard rose 78 cents, or 1.8 percent, to $44.17 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has climbed 6.9 percent this year.
Providence, founded in 1989, manages $23 billion and focuses on media, communications, information and education investments, according to its website. The private equity firm acquired educational services provider Study Group last year. It joined with Goldman Sachs Capital Partners and Leeds Equity Partners to purchase Education Management in 2006.
Blackboard is a smart strategic fit for Providence because its education tools are “essentially required” for universities, said Scott Berg, an analyst with Feltl & Co. in Minneapolis. Elluminate Inc. and Wimba Inc., virtual classroom companies bought by Blackboard last year, will be strong revenue generators for Providence as online education becomes more commonplace, Berg said.
The transaction is expected to close in the fourth quarter, the companies said. Blackboard agreed to a breakup fee of $49.1 million if it doesn’t complete the sale, while Providence would pay a termination fee of $106.4 million, according to a regulatory filing.