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A $93 million eCollege transfer

Sale, return to Denver will net big payday for company's CEO

Roger Fillion And David Milstead, Rocky Mountain News

Published May 16, 2007 at midnight

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After packing up its corporate headquarters and moving it to Chicago two years ago, homegrown eCollege.com is returning to Denver. Sort of.

And the Internet company's CEO stands to pocket more than $90 million in the process.

ECollege, which provides online degree programs for universities and other institutions, has agreed to be sold to London-based Pearson PLC for $477 million.

ECollege will become a separate Pearson business unit with headquarters in Denver. The thinly staffed Chicago headquarters, where top executives were based, will be shuttered. ECollege employs some 250 here.

"It is too early to tell if this will mean more jobs in Denver," eCollege spokeswoman Kristi Emerson said in an e-mail. "However, at this point we don't anticipate the deal will mean less jobs."

Textbook publisher Pearson is paying a total of $538 million for eCollege, or $22.45 a share, minus $41 million for the sale of eCollege's Datamark enrollment division and about $20 million of net cash on eCollege's balance sheet. That brings the price tag to $477 million.

"It's a fair price," said analyst Trace Urdan of Signal Hill Capital Group.

Referring to eCollege CEO Oakleigh Thorne, Urdan added: "Given Oakleigh Thorne's stake in the company and influence over the board, it would be difficult for them to do anything other than what he wanted to do."

Thorne, credited with reviving eCollege after the 2000 Internet implosion, owns 3.9 million shares, or 17.6 percent of eCollege, including the holdings of trusts and partnerships he controls, according to company filings. Thorne stands to receive $93.2 million in gross proceeds from stock, option profits and estimated severance payments after the deal closes.

"He earned every penny of that," said analyst Matthew Litfin of William Blair & Co. "This company was headed for bankruptcy at the point he stepped in."

Thorne, who won't join the merged company, became CEO in May 2000 and sank his own money into the business.

At the time, eCollege was burning through its cash reserves at a rate of $8 million to $10 million a quarter. Little revenue was coming in. The company was diagnosed with a life expectancy of about 12 months.

It has since become profitable and thrived.

As part of the Pearson deal, Thorne and a group of investors agreed to buy eCollege's Salt Lake City-based Datamark business, which helps institutions recruit and retain students.

ECollege bought Datamark in September 2003 for $72 million, or $31 million more than what the Thorne-led group is paying.

Founded in 1996, eCollege became a publicly traded company in 1999. Since its initial public offering of stock, eCollege's revenues have grown from $4 million to $116 million in 2006.

The sale is expected to close in the third quarter.

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