District-based Blackboard has agreed to a $1.64 billion buyout by Providence Equity Partners and a group of investors after a four-month review of the education software company’s strategic options.
The deal will take the company private and existing management intends to stay put, but some industry observers question what the sale to a private equity shop signals for Blackboard’s future.
The all-cash purchase will earn Blackboard’s stockholders $45 per share. That’s a 21 percent premium over the $37.16 per share closing price on April 18, the day before the company announced it was entertaining buyout offers. Shares closed at $44.17 on Friday.
Blackboard received unsolicited buyout offers in March and promptly formed a committee to evaluate possible next steps. In April, the company made its internal deliberations public and hired Barclays Capital as a financial adviser.
The transaction is expected to close in the fourth quarter of this year.
Co-founders Michael Chasen and Matthew Pittinsky created Blackboard in 1997 with a handful of friends, growing it through the dot-com bust and into a global business that turned a $16.6 million profit last year.
The company has made a concerted effort in the last year or two to target emerging technologies, such as mobile and social media, that might have applications in the education arena.
“Through our conversations, Providence has expressed interest in our business model,” said Chasen, the company’s chief executive. “We are very much not only going to continue to develop and bring new products to market in those areas, but with Providence I think we can accelerate some of that.”
Indeed, Providence is no stranger to the education marketplace. Its portfolio includes Archipelago Learning, Ascend Learning, Catalpa, Edline, Education Management Corp. and Study Group, according to a statement.
“Providence has done a lot of work in the online education market and has a lot of confidence in the online education market, so this is another way for them to invest in that thesis,” said Trace A. Urdan, a financial analyst at Signal Hill.
But Urdan said Blackboard appears poised at a “strategic crossroads” because its dominance in the college market means the company would need to find new revenue streams to achieve true high-growth potential.
“That’s not going to be something that Providence is going to do,” he said. “Providence did not buy them to fund some dramatic innovation in the space. They will continue to support the existing customer base and defend against guys who would take away share from Blackboard.”
Chasen plans to stay at the helm of the company, along with his senior management team, though Urdan suggested that the buyout provides a “graceful exit” for him to leave and launch a new venture.
“I don’t see a time in my future when I’m not involved or the leader of Blackboard,” Chasen said.