Skillsoft Goes Private

SkillSoft (Nasdaq: SKIL) a provider of e-learning and performance support solutions for global enterprises, government, education and small to medium-sized businesses with a huge catalog of "off-the-shelf" courses in a variety of subjects from IT to business skills announced today that it will no longer be publicly held.

In an announcement today, Skillsoft stated that a group of independent investors (investment firms) including Berkshire Partners LLC, Advent International Corporation and Bain Capital Partners, LLC will take Skillsoft private.

Under the terms of the acquisition, SkillSoft shareholders will receive $10.80 in cash for each SkillSoft ordinary share or American Depositary Share ("ADS"), representing a 26% premium to the average closing price of SkillSoft's ADS over the one-year period ended on February 11, 2010 and a 49% premium to the average closing price of SkillSoft's ADS over the five-year period ended on February 11, 2010. The fully diluted equity value of the transaction is approximately $1.1 billion.

This is a huge, apparently friendly, takeover of Skillsoft and a shift from a publicly held company to a privately held company.

What does this mean for Skillsoft customers? Apparently the investment team will keep the current Skillsoft team in place and they haven't formally announced any plans but I think the key question will be how much equity will the new owners invest in maintaining and updating Skillsoft courses? As content and styles age and progress, subscription based models require the company to continually invest and innovate.

Time will tell in terms of the investors intentions for Skillsoft.

Read more at the Skillsoft press release on the topic.

As stated in the DailyFinance

Through...dealmaking, SkillSoft now has a platform that includes more than 30,000 education titles in 19 languages and a sophisticated learning management system. Its focus is on corporate topics, like Six Sigma, project management and IT skills.

SkillSoft also has a salesforce of more than 240 and over 3,000 customers, of which 55% are in the Fortune 500 and 24% from the Global 2000.

The problem? The recession has been grueling. As unemployment ballooned, the need for employee education has deteriorated. At the same time, customers needed to find ways to cut back on costs.

Even so, SkillSoft has been able to generate strong cash flows. It helps that the company has lots of scale and a large base of customers that continue to buy software.

Take a look at SkillSoft's latest quarterly report. While revenues declined 3% to $80.4 million, net income was $19.6 million, or $0.21 per share, up from $12 million or $0.12 per share in the same period a year ago. Adjusted EBITDA was $32.1 million. No doubt, it certainly helps that the company has gross margins at a juicy 91%.

See the article Private Equity Firm Taking SkillSoft Private for more details.

The deal is valued at about $1.1 billion dollars. According to the Wall Street Journal:

The trio of private-equity buyers are all headquartered in Boston. Though smaller in scale, the deal still ranks as the second-largest going-private transaction since the beginning of 2009, ranking behind the $4 billion takeover of IMS Health Inc. led by buyout shop TPG Inc

In November, SkillSoft posted higher-than-expected results in its fiscal third quarter amid higher margins and boosted its outlook for the year. The company cut jobs and costs last year as customers trimmed the size of contracts because of the recession.

Still, the Standard & Poor's Ratings Services put SkillSoft's ratings—already at junk level—on its watch list, saying a downgrade was highly likely because the deal would significantly weaken the company's credit metrics.

See the entire Wall Street Journal article here. It seems that e-learning firms are struggling in the economy even though they hold a great deal of potential.
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