The top two providers of learning management system (LMS) software and services for higher education, Blackboard Inc. and WebCT Inc., have announced an agreement to merge. The merger would leave the combined entity with more than 80 percent of the LMS market share in higher education, which includes the software platforms that drive online learning. The impending deal has a price tag reported to be approximately $180 million.

Blackboard says the transaction will combine two academic eLearning organizations into a single company with the client base, resources, and expertise to meet the rapidly evolving needs of educators around the world. But the deal also has the potential to squeeze out other LMS providers and reduce competition, some observers fear.

Both companies' boards of directors have approved the merger. The combined firms will operate under the Blackboard brand. Blackboard President and CEO Michael Chasen will continue to serve in that capacity for the new entity.

The ultimate value of the deal will depend on WebCT's cash balance at closing. Under terms of the agreement, Blackboard will acquire WebCT in a cash transaction for $180 million, which values the offer at approximately $154 million when considering WebCT's Aug. 31 cash balance of $26 million.

According to Blackboard, more than 3,700 higher-education, K-12, corporate, government, and commercial academic institutions use solutions offered by the two organizations. A survey done by Market Data Retrieval (MDR), a provider of education market research, found that Blackboard and WebCT held the top two slots in the LMS market for U.S. colleges and universities in 2005. Blackboard held 51 percent of that market, while WebCT held 32 percent.

Another education market research firm, Eduventures Inc., estimates the 2005 eLearning platform market in higher education will reach $220.7 million, a growth rate of 17.9 percent. Eduventures also estimates the 2005 market for K-12 schools to be $136 million, with an expected annual growth rate of 5 percent over the next two years.

"The two companies combined create a powerhouse for the learning management system market, [leaving] a pack of smaller players--and open-source solutions--to jockey for position," said Catherine Burdt, lead postsecondary analyst at Eduventures.

"This is a dominant market position in higher education ... so their real opportunity will be in leveraging digital content and add-on services, as well as strengthening positions in K-12 and international markets," Burdt said.

Another analyst, John G. Flores of the United States Distance Learning Association, agreed the merger would change the landscape of the eLearning market.

"WebCT and Blackboard both hold dominant positions in the LMS sector of the K-12 and postsecondary education markets. Combining the two companies should bring new services, products, capabilities, and an economy of scale," said Flores.