Pearson Plc, the world’s biggest educational publisher, has agreed to buy Chicago-based eCollege.com for $538 million to add online degree courses in the U.S.
The company’s headquarters will return to Denver when the deal closes later this year, said eCollege spokeswoman Kristi Emerson. ECollege was founded in Denver in 1996 and currently employs about 250 people here. The company moved it’s executive offices to Chicago in 2005 and has about 10 employees there. That office is expected to close, Emerson said.
Stockholders of eCollege will receive $22.45 a share, London-based Pearson said in a statement late Monday. The 7.1 percent more than the May 11 closing price.
ECollege went public in 2000, raising $63.2 million. The company develops software used by schools to run online classes. The technology works with about 180 U.S. colleges and universities to offer more than 1,000 degree, certificate and diploma programs.
“We provide a total outsource solution to put together an online degree program,” Emerson said.
Pearson will get $20 million of cash on eCollege’s balance sheet and $41 million of proceeds from the sale of eCollege’s Datamark student enrollment business to a group of investors led by Oakleigh Thorne, eCollege’s chairman and chief executive, according to a company statement. The cash will give Pearson a net purchase cost of $477 million.
ECollege acquired Salt Lake City-based Datamark in 2003 for $75 million.
Thorne will step down from eCollege with Matthew Schnittman – current president of the eCollege eLearning Division – joining Pearson as president of eCollege.
Pearson is expanding its education business through acquisitions, including its May 4 agreement to buy Reed Elsevier’s Harcourt unit for $950 million.
“The acquisition meets our financial goals and supports our strategy of combining content, technology and services to advance learning,” said Pearson Chief Executive Officer Marjorie Scardino in a statement.
Pearson, which also owns the Financial Times newspaper and publisher Penguin Group Inc., competes with McGraw-Hill Cos. and Houghton Mifflin Co. in providing textbooks, test marking and online materials.
ECollege had 1.2 million students enrolled in online courses in 2006. The company had sales of $52 million and profit excluding some costs of $22 million last year. The acquisition should be done by the third quarter of 2007, Pearson said.
Pearson said last month that revenue growth is meeting its targets for 2007. The company expects “good” earnings growth for the full year.
Standard & Poor’s said in a statement the acquisition of ECollege wouldn’t affect Pearson’s credit ratings. Pearson is rated BBB+, the third-lowest of Standard & Poor’s 10 investment- grade credit rankings.
ECollege shares increased $1.07, or 5.1 percent, to $22.04 on the Nasdaq Stock Market.
Information from Bloomberg News was used in this report.
