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Docent and Click2learn to Merge

In a move to strengthen the e-learning sector, rivals Docent and Click2learn Monday said they will merge companies to build the largest education and training software supplier.

The deal has already been approved by the boards of both companies and now goes to shareholders for a vote and a standard federal regulatory review process. If everything goes as planned, the companies estimate the transaction should be completed sometime in early 2004. Financial terms of the agreement were not disclosed. A joint statement by both companies suggests a healthy balance sheet between them with upwards of $40 million in cash on hand.

The combined company would compete with pure plays like DigitalThink and Saba Software. Docent/Click2learn's offerings boast more than 600 enterprise customers including contracts with 40 percent of the Fortune 50 and over 35 percent of the Global 50. The joint company is also aided by strong partnerships with organizations such as Accenture, Deloitte, Exult, IBM, Microsoft, NEC, Primedia, and Thomson Learning.

The two companies say they'll offer the usual fare of e-learning tools including Learning Management, Learning Content Management, Analytics, Virtual Classroom, Knowledge Management, Collaboration, and Performance Management.

Docent president and chief executive R. Andrew Eckert will be CEO of the combined company. Kevin Oakes, Chairman and CEO of Click2learn, will serve as the president.

"Together, we will become the clear choice for organizations looking to standardize on a single learning and performance provider," Eckert said. "Over the past year, both Docent and Click2learn have continued to grow our customer bases and expand our geographic reach. With similar philosophies and cultures, and complementary technology and offerings, we believe the combined company will be poised to accelerate our current momentum, and achieve significant growth and operational leverage going forward."

The companies said other executive management positions and the board of directors should be named before the transaction closes.

"The management team's number one priority will continue to be customer care and success," said Eckert. "Both Kevin and I feel a healthy mix of representation from each company will help ensure this and we look forward to working with a broad team that represents the best of what both companies currently offer."

The corporate e-learning market suffered the same problems as other dot-coms during the past two lean years after generating nearly $2.3 billion in 2000. The sector seems to be back on track for a growth rate of more than 50 percent, which will allow it to exceed $18 billion in 2005, according to analyst firm IDC. The North American market alone is expected to grow to $11.7 billion by 2005, according to research by Kinetic Information and Collaborative Strategies. The sector has seen a fresh opportunity with the marriage of enterprise content management and hosted Web-based learning services. The analyst firm says the combination of content management and e-learning has been appealing to customers' eagerness to gain access to all relevant learning materials while also addressing the all-important bottom line and recent concerns over travel.

Under terms of the Agreement and Plan of Reorganization, Bellevue, Wash.-based Click2learn and Mountain View, Calif.-based Docent will each be acquired by a new corporate entity. Stockholders of Click2learn will receive .4144 shares in the new company for each common share held on the closing date or approximately 52 percent of the new company, without taking into account the exercise of options prior to the closing date. Stockholders of Docent will receive .9525 shares in the new company for each common share held on the closing date or approximately 48 percent of the new company, without taking into account the exercise of options prior to the closing date.

Soon after the two companies wade through their honeymoon phase, the plan is to start making money through cross-selling complementary products and services, which both say is enhanced by the presence of the other.

"Although organizations across the globe recognize that our products are 'mission critical' in order to stay competitive in today's environment, the buying decision has continued to be confusing given the lack of a clear leader in our industry," Oakes said in a statement. "This merger provides our joint customers with a partner that has the widest experience base, proven technology and the most comprehensive offering of any supplier in our market. Combined with our unmatched financial strength, I feel this merger is exactly what the market needs at this point in time -- a clear leader that companies and stockholders can rely on for years to come."