RealTime IT News

Plato Learning Buys NetSchools for $25M

Minneapolis-based Plato Learning has shelled out $25 million in cash and stock to acquire Web-based e-learning software firm NetSchools, Corp.

Under terms of the acquisition Plato Learning would pay $6 million in cash and 800,000 shares of its common stock for the assets of NetSchools, which includes the Constellation product, an e-learning system that includes hardware, software and Internet access.

The transaction also involves the payment of 200,000 warrants for shares of Plato's Learning stock; assumed liabilities and transaction expenses; and additional consideration of up to approximately $6.0 million, contingent on NetSchools' revenues generated through October 2004.

Plato, which hawks computer-based instruction products and services, said the transaction would create the first company in the K-12 e-learning space to provide a complete standards-based, e-learning platform.

When the deal closes on May 17, the plan is to marry the core platforms of the two companies -- Plato's TeachMaster and NetSchools' Orion and Constellation - to create an open architecture education delivery platform that is fully correlated with local, state and national school standards.

Plato Learning CEO John Murray said the integration of the two technologies would give the company a large chunk of the market for electronic learning products and services.

"(This acquisition) creates a powerful suite of integrated CD-ROM, LAN and web-based curriculum and instructional management products that are capable of fully supporting a school district's investment in meeting accountability demands," Murray said, nothing that the addition of the NetSchools Constellation and Orion platforms would add strength to the company's position in the in local and web-based supplemental and core curriculum software for K-12 education.

The company said NetSchools generated revenues of approximately $16.0 million in 2001, including $4.0 million from sales of software and services. "The acquisition is expected to be dilutive to Plato Learning's earnings per share in the remainder of its current fiscal year ending October and in the earlier quarters of fiscal 2003," Plato said. It is expected to become accretive in the latter quarters of the fiscal year ending October 2003

Once the deal closes, Plato said NetSchools co-founder Tom Greaves would remain active in developing and promoting the combined strategic and selling efforts of the merged entities. NetSchools CEO Scott Redd would remain as a consultant to the combined firm.

Separately, Plato said it expects revenue and earnings in the second quarter to come in below previous projections. The company attributed the changes to deferred transactions.

Under new guidance, Plato said earnings would come in between 1 cent and 3 cents per share in the second quarter. Revenues are projected between $17 million and $17.3 million for its second fiscal quarter.