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E-Stamp to Merge with Learn2.com, Focus on E-learning

E-Stamp Corp. is moving to jettison its transportation management solutions business and cash in on the potential of the corporate e-learning market through a merger with learning services provider Learn2.com.

Financial terms of the deal -- announced Friday -- were not disclosed, but the companies said that upon completion of the merger, E-Stamp shareholders will own about 50.1 percent of the combined entity while current Learn2.com shareholders, including its current convertible debenture holder, will own the remaining 49.9 percent.

The debenture holder has agreed that before the merger is completed the debenture will be retired and exchanged for shares of common stock of Learn2. com and payment of $1 million at the closing. The debenture holder will own 16.6 percent of the common stock in the new company. The holder, and the senior management and directors of the combined company, have agreed to lock up for six months following the merger with restrictions on trading.

E-Stamp said that prior to closing it will phase out its existing transportation management solutions, and it is exploring options to transition its DigitalShopper customers to a third-party provider.

The new company will take the name Learn2 Corp. It will focus on growing the corporate e-learning market, a space in which both IDC and META Group see strong potential.

"The future of corporate e-learning looks extremely bright...worldwide revenues will graduate beyond the $23 billion mark by 2004 -- extraordinary considering the market was less than $2 billion at yearend 1999," IDC said in a paper titled "Worldwide Corporate eLearning Market Forecast and Analysis, 1999-2004."

In a recent research note, Elizabeth Sun of META Group added, "E-learning is emerging as an essential tool for corporate survival as the pace of change quickens...In the current tight budget environment, e-learning remains popular because it decreases travel costs."

For Learn2.com, the merger was prompted by a need for capital to keep growth on track -- its corporate e-learning business has grown for eight consecutive quarters -- and repay its debt. E-Stamp was less transparent in its motives, though Robert 'Bo' Ewald, president and chief executive officer of the company, noted, "After evaluating a number of strategic options, E-Stamp has chosen to merge with Learn2.com to serve the best interests of E-Stamp's shareholders."

E-Stamp will waste no time helping Learn2.com get out from under its debt burden. The company will advance Learn2.com $2 million as a dowry of sorts -- a first step towards the merger's consummation. And Donald Schupak, chairman of Learn2.com, said the merger will leave the combined company with a strong balance sheet -- debt free with between $15 million and $17.5 million in working capital.

"The merger of these two companies provides an elegant solution," Schupak said. "With the strong balance sheet that the merger will provide, we believe the company will be a legitimate contender for market leadership and profitability."

The merger is expected to close during the third quarter of 2001, subject to the approval of the shareholders of both companies and E-Stamp having a minimum net cash position at closing. Stephen Gott, CEO of Learn2.com, will continue to manage the new companies operations in that role. Ewald will step in as chairman of the combined company. Schupak will remain on the board and will become chairman of the executive committee.