BANGALORE Education software company Blackboard Inc BBBB.O said it would be bought by private equity firm Providence Equity Partners, a well-known investor in the education field, for $1.64 billion in cash.
The $45 per share offer is at about a 4 percent premium to Blackboard's Thursday close of $43.39.
"We are somewhat disappointed by the final price tag, though we do not necessarily expect a higher bid," Stifel Nicolaus analyst Tom Roderick said in a note.
The two companies had started the process of reviewing Blackboard for a possible deal in March 2011, they said in a statement on Friday.
Providence, which mainly invests in media, communications, information services and education investments, will also assume about $130 million of Blackboard's debt.
"It seems rather clear from the drawn-out process that the Providence bid represents the best available option for Blackboard at the current juncture, as it offers a reasonably fair price, while simultaneously allowing Blackboard to maintain its brand and identity," Roderick said.
He downgraded his rating on the company's stock to "hold" from "buy" and dropped his $55 price target.
Blackboard, which had a market value of $1.52 bln as of Thursday, grew its 2010 revenue about 19 percent to $447.3 million.
Providence is the fifth biggest shareholder in for-profit education company ITT Educational ESI.N and also holds shares of Archipelago Learning ARCL.O.
It is also the second biggest shareholder in Education Management EDMC.O, which it bought along with Goldman Sachs (GS.N) for $3.8 billion in 2006.
On April 19, Blackboard, which provides custom software to educational institutions for computer-aided learning and classroom courses, said it had received buyout offers and was considering selling itself.
On Thursday, Reuters reported that the two parties were nearing a deal.
The deal is expected to close in the fourth quarter after which Blackboard will become a privately held company, but continue to be led by its existing senior management team.
Barclays Capital advised Blackboard on the deal.
Dewey & LeBoeuf acted as legal adviser to Blackboard while Weil, Gotshal & Manges served as legal counsel to Providence.
Shares of the Washington DC-based company were up 2 percent at $44.16 in late morning trade on Nasdaq. About 29 million shares had changed hands by 11:30 ET -- 37 times normal volumes.
(Additional reporting by A. Ananthalakshmi; Editing by Gopakumar Warrier)