Pearson / eCollege

Pearson, the international education and information company, today announced it has agreed to acquire eCollege, a leader in the fast-growing US online distance learning market.

The net cost to Pearson is USD 477m, consisting of a consideration of USD 538m (USD 22.45 per share) less USD 41m of proceeds from the agreed sale of eCollege's Datamark division and approximately USD 20m of net cash on eCollege's balance sheet.
The transaction has been approved by eCollege's Board of Directors and is subject to approval by its shareholders.

eCollege, founded in 1996, works with its partner educational institutions to design, build and support online degree, certificate, diploma and professional development programs. It provides a full range of on-demand software services including course management, virtual campuses, and assessment, reporting and retention monitoring tools. The company also provides a suite of support services which include hosting, help desk, course development, technical consulting, instructional design and faculty training. eCollege supports approximately 180 institutions and its customers include some of America's leading university and career colleges including DeVry University, Kaplan University, Laureate, Texas A&M University at Commerce and Eastern Michigan University.

In 2006, student enrollments in its online courses were approximately 1.2 million. It has played a particular role in helping educational institutions broaden access to post-secondary education for students who may be unable to attend full-time. From 2002 to 2006, the number of students taking online postsecondary qualifications with US institutions grew at a compound annual rate of more than 30% (source: Eduventures).

This acquisition extends Pearson's position as the world's leading education company and supports its goals of building its digital and international education businesses.

Pearson expects the acquisition to strengthen both its own education business and eCollege in three major areas: Pearson and eCollege share many customers in the higher education market. Together the two companies expect to provide customers with additional value and choice, and a full range of services across content, curriculum development, formative assessment and homework technologies and outsourced solutions. Pearson's publishing divisions will continue to work with third party commercial and open source course management providers, and eCollege will continue to work with third party publishers; Pearson's scale and reach will enable eCollege to serve new customers in school, post-secondary education and professional/ vocational markets, both in the US and around the world.

In 2006, eCollege generated sales of USD 52m and operating profit of USD 22m before central costs (and excluding the Datamark division). From 2003 to 2006, sales grew at a compound annual rate of 22%. Pearson expects the acquisition to be broadly neutral to adjusted earnings per share in 2008, its first full year, and to enhance adjusted EPS and generate a return above Pearson's cost of capital from 2009.

The transaction is expected to close in the third quarter of 2007. It includes an agreement to sell the Datamark student enrollment business to a group of investors led by Oakleigh Thorne, eCollege's chairman and CEO. Matthew Schnittman, President of eCollege's eLearning division, will join Pearson and continue to lead the company. It will operate as a separate unit from Pearson's textbook publishing companies and will retain its offices in Denver, Colorado.