Two leading providers of enterprise software and services to the education community, Blackboard Inc. (Nasdaq: BBBB) and WebCT, Inc., today announced a definitive agreement to merge. Under terms of the agreement, Blackboard will acquire WebCT in a cash transaction for $180 million, which values the offer at approximately $154 million, net of WebCT’s August 31, 2005 cash balance of $26 million. The ultimate value of the offer will vary depending on WebCT’s cash balance at closing. The transaction will combine two pioneering academic e-Learning organizations into a single company with the client base, resources and expertise to uniquely meet the rapidly evolving needs of educators around the world.

The merger of Blackboard and WebCT marks a major milestone in the build- out of networked learning environments by colleges, universities, schools and other education providers. It creates a large, collaborative community of academic institutions-a global e-Learning “Community of Practice”-supported by unsurpassed resources for innovation and support. Currently, more than 3,700 higher education, K-12, corporate, government and commercial academic institutions enhance their learning environments with solutions offered by the two organizations. Bringing Blackboard and WebCT together provides a powerful platform for innovating and supporting what at many institutions is the least developed, yet one of the most strategic segments of their technology infrastructure. Further, it will break down barriers and enable collaboration across institutions by developers and end-users at a critical time in the evolution of e-Learning technologies.

Both companies’ Boards of Directors have approved the merger. Subject to regulatory approval and other customary closing conditions, the transaction is expected to close late this year or in early 2006. The combined companies will operate under the Blackboard name and brand with corporate headquarters located in Washington, DC. Operations will continue in WebCT’s facilities in Massachusetts and Canada. Michael Chasen will continue to serve as President and CEO.

WebCT offers many of the same financial characteristics of Blackboard’s business model, including an annual recurring subscription-based licensing model, ratable revenue recognition, a stable educational institutional client base and historically high renewal rates. As a result, the combination is expected to enhance growth and profitability over time. Blackboard expects the acquisition to close late this year or in early 2006. Assuming the merger closes by early 2006, Blackboard expects the transaction to be moderately accretive to earnings on a non-GAAP basis and dilutive on a GAAP basis for calendar year 2006, and significantly accretive to earnings on a non-GAAP basis and dilutive on a GAAP basis for calendar year 2007. The combined company expects to realize significant efficiencies by leveraging shared development infrastructure, and mitigating duplicative marketing initiatives and administrative expenditures. Blackboard retained Credit Suisse First Boston as its financial advisor and Wilmer Cutler Pickering Hale & Dorr and McDermott, Will & Emery as its legal advisors. WebCT retained Goldman Sachs & Co. as its financial advisor and Choate, Hall & Stewart and White & Case as its legal advisors.