Smartforce and Skillsoft to Merge

Major players combine to create e-Learning industry powerhouse

SmartForce and SkillSoft today announced that they have signed a definitive agreement to merge in a stock-for-stock transaction. The combination will create a global leader in corporate e-Learning and bring together SmartForce’s leading portfolio of IT, enterprise applications and sales and CRM e-Learning solutions with SkillSoft’s comprehensive suite of business and professional e-Learning solutions, including management, leadership, communication, project management and customer service.

Under the terms of the agreement to merge the companies, unanimously approved by both Boards of Directors, SmartForce shareholders are effectively receiving a premium of approximately 19 percent based on Friday’s closing prices and approximately a 30 percent premium to the 30-day trailing average prices of the two companies’ shares. Following the merger, SmartForce shareholders will own approximately 58 percent of the combined company, and former SkillSoft shareholders will own approximately 42 percent. Legally, the transaction is being structured as a merger of SkillSoft into a newly formed subsidiary of SmartForce, with SmartForce issuing shares to the former SkillSoft shareholders. SkillSoft shareholders will receive 2.3674 SmartForce shares for each share of SkillSoft that they own. The transaction, which is expected to be tax-free to shareholders of both companies for U.S. federal income tax purposes, will be accounted for as a purchase.

The combined company will be led by management and a board of directors derived from both companies. Greg Priest, Chairman and Chief Executive Officer of SmartForce, will be Chairman and Chief Strategy Officer of the merged company. Chuck Moran, President and Chief Executive Officer of SkillSoft, will serve as President and Chief Executive Officer. Tom McDonald, Executive Vice President and Chief Financial Officer of SkillSoft, will hold the same position at the merged company. Of the five additional Executive Vice Presidents to serve for the new company, three will come from SmartForce and two from SkillSoft. The new Board of Directors will include three directors who currently sit on SmartForce’s board, three directors who currently sit on SkillSoft’s board, and one new outside director originally nominated by SkillSoft.

“e-Learning is transforming enterprises worldwide, allowing companies to distribute knowledge to individuals precisely when they need it in a much more efficient and powerful way. This transaction creates a powerful force in e-Learning,” said Greg Priest. “The combination of our highly complementary organisations and product families will result in clear strategic benefits that we believe will create substantial long-term customer and shareholder value. By significantly expanding the content areas in which we can develop learning solutions for our customers and partners, we have the opportunity to grow revenues and profits and to build upon and enhance our combined position as the leader in e-Learning.”

“For some time, we have intended to more fully expand our product line beyond interpersonal and other critical business skills to effectively address all of the e-Learning needs of our global customers,” said Chuck Moran. “Following four years of focused execution to build a leading market share in soft skills e-Learning, we are confident that the timing is right to aggressively expand into the IT and vertical skills areas. This merger clearly positions our combined entity to offer the most comprehensive, high quality e-Learning solutions in the market.”

The combined entity will be the largest corporate e-Learning company in the world, offering over 3,000 courses and 8,000 hours of courseware. With the critical mass and scale to offer comprehensive e-Learning solutions on a global basis, the company will be positioned to address a comprehensive range of training needs for all functional areas of its customers’ organisations.

Further, the combined company will have one of the most extensive sales and distribution platforms in the marketplace, and a combined customer base of over half the Global 5000.

The officers and directors of each company have agreed to vote in favour of the merger, and SkillSoft’s largest shareholder, Warburg, Pincus, which holds approximately 32% of SkillSoft’s shares, has irrevocably agreed to vote in favour of the merger. The merger agreement provides for the payment of termination fees by each company in certain circumstances, and each company has granted the other an option to purchase up to 19.9 percent of the other in certain circumstances.

Subject to regulatory and shareholder approvals and customary closing conditions, the transaction is expected to close in the third quarter of 2002. Credit Suisse First Boston is acting as financial advisor to SmartForce on the transaction. Banc of America Securities is acting as financial advisor to SkillSoft on the transaction.

June 11th, 2002