SmartForce, Centra Call Off Merger

E-learning company SmartForce plcs acquisition of collaboration software vendor Centra Software Inc. is off, after the companies mutually terminated the deal late Tuesday.

First announced in January, the acquisition was expected to combine two complementary technologies: SmartForces e-learning platform, content and services with Centras Web meeting and conferencing capabilities. Perhaps the acquisition was doomed from the start though. The day the acquisition was announced, SmartForces stock price dropped $3.45, shaving $43 million off the stock swap deal, which was originally valued at $284 million.

Since then, SmartForces stock price has plummeted to $6.99 a share, which would have made the deal worth just a little over $75 million.

But the problem was both companies diminishing financial performances, according to officials of both companies. Both companies issued warnings of falling revenues and rising losses late Tuesday.

Greg Priest, chairman and CEO of SmartForce, said in a letter to customers published at the SmartForce Web site that both companies need to focus on improving their bottom-line results.

"Were clearly disappointed that the merger will not be happening," said Priest in Redwood City, Calif. "We continue to believe that there is a strong strategic fit between the companies, but stepping away now lets us focus fully on the things we need to do within SmartForce."

Chris Reed, vice president of corporate strategy at Centra in Lexington, Mass., had a similar assessment of the failed deal.

"The core reason was that the last quarter was pretty ugly for both companies, so we decided to focus on our core businesses," said Reed. "We can leverage the synergies we have by partnering instead."

The companies will resell and co-market each others offerings instead. In fact, the next version of Centras CentraOne platform, which will be announced Monday and generally available in June, will include some SmartForce technology.

Other bidders are expected to emerge for Centra, with published reports (including Thomson Financial Inc.s M&A Reporter) indicating that SkillSoft Corp. is a likely suitor.