• Home /
• Citybiznews /
• Mergers & Acquisitions /

SSI Investments II Limited Announces SkillSoft Acquisition of Element K Business from NIIT

ELEMENT K COMPLEMENTS SKILLSOFT'S CAPABILITIES FOR SERVING THE GLOBAL CORPORATE TRAINING MARKET

NASHUA, N.H.--(BUSINESS WIRE)--SSI Investments II Limited, a parent company of SkillSoft Limited (formerly SkillSoft PLC) ("SkillSoft"), a leading SaaS provider of on-demand e-learning and performance support solutions for global enterprises, government, education and small- to medium-sized businesses, today announced that its indirect subsidiaries, SkillSoft Corporation and SkillSoft Ireland Limited (the "Buyers") have acquired the Element K business from NIIT Ventures, Inc., a subsidiary of NIIT Limited. Under the terms of the agreement, pursuant to which the transactions contemplated by the agreement closed effective today, the Element K business was acquired for $110 million in cash, subject to adjustments.

The acquisition adds to SkillSoft's existing offerings in learning content and learning platform technology through the addition of Element K's complementary offerings in e-learning content, virtual labs, ILT print materials and custom development services. Also, the addition of Element K employees in sales, customer support and product development strengthens SkillSoft's long-term ability to compete for a greater share of the $48 billion global corporate training market that includes many larger players with more comprehensive product offerings.

"As our enterprise customer organizations are increasingly connecting their learning strategies to their overall business objectives, we find those organizations looking for a greater range of products and services. Our enterprise customers have many choices of suppliers to meet their ever-expanding needs, and we continuously look for ways to expand our capabilities to sustain and increase our competitiveness," said Chuck Moran, CEO of SkillSoft. "The acquisition will immediately bring a wider range of solutions to the customers of both SkillSoft and Element K. In addition, by combining the two organizations we will be able to expand our investments in the technology, service and content solutions delivered to customers. This is key to increasing our ability to compete with the many larger players in the global corporate training market."

Element K offers many of the same financial and operating characteristics as SkillSoft's business model, including an annual recurring subscription-based licensing model for access to its learning resources library, a direct sales force distribution system complemented by resellers and telesales support, and a Global 2000 client base offering visibility through multi-year contracts. As a result, over time the acquisition is expected to support both SkillSoft's revenue predictability and growth.

Morgan Stanley and Barclays Capital acted as financial advisors to SkillSoft on the transaction. Ropes & Gray and WilmerHale provided legal counsel to SkillSoft on the transaction.

Financial Impact

Under the terms of the acquisition agreement, the Buyers paid approximately $110 million in cash. The purchase price is subject to certain post-closing adjustments related to Element K's closing balance sheet. The cash consideration was financed through available cash balances and additional bank financing of approximately $90 million from the Company's existing senior credit facilities.

The transaction is expected to be dilutive with the Company's earnings prepared in accordance with generally accepted accounting principles ("GAAP") during fiscal years ended January 31, 2012 and 2013, due to transaction and integration costs along with an adjustment to deferred revenue as a result of the application of purchase accounting. The dilutive impact to GAAP earnings may extend beyond the fiscal year ending January 31, 2013, based upon the fair values and asset lives determined for identified intangible assets in purchase accounting, which will be amortized over their useful lives. The fair market valuation analyses related to the capitalization of intangible assets will be completed by the Company's fiscal year ended January 31, 2012.

The Company's management has furnished in this press release non-GAAP adjusted revenue ("Adjusted Revenues") and non-GAAP adjusted EBITDA ("Adjusted EBITDA"), which are financial measurements that do not comply with generally accepted accounting principles in the United States. Adjusted Revenues exclude the fair market adjustments to deferred revenue from the application of purchase accounting related to the Element K acquisition.

Adjusted EBITDA represents net income (loss) plus (i) interest expense, (ii) (benefit) provision for income taxes and (iii) depreciation and amortization, less interest income and other income (expense). Additions to Adjusted EBITDA include among other items, merger and integration related expenses as well as revenue reductions and incremental expenses related to purchase accounting related to the Element K acquisition. Deductions from Adjusted EBITDA include internally-generated content development costs for the e-learning business which are capitalized by Element K and predominately represent personnel costs. Historically, Element K's internally-generated content development efforts for its e-learning business met criteria to be capitalized as assets, whereas the Company's content development efforts are typically expensed as incurred. Accordingly, Adjusted EBITDA from the Element K operations presented below has been adjusted to conform to the Company's treatment of content development expenses for purposes of consistency. Accordingly, Adjusted EBITDA from the Element K operations presented below is consistent with the Company's treatment of content development expenses. The Company's management believes that these items are not indicative of the Company's future operating performance.

About SSI Investments II Limited

SSI Investments II Limited is an indirect parent of SkillSoft Limited, a leading SaaS provider of on-demand e-learning and performance support solutions for global enterprises, government, education and small to medium-sized businesses. SkillSoft enables business organizations to maximize business performance through a combination of comprehensive e-learning content, online information resources, flexible learning technologies and support services. SkillSoft is on the web at http://www.skillsoft.com.

blog comments powered by Disqus

• Get Email Newsletter
• Subscribe to RSS
• Text Size: A A