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Skillsoft to buy VC-backed Codeacademy for $525m

Skillsoft has agreed to acquire Codecademy, an online learning platform for technical skills, for approximately $525 million in cash and stock.

Skillsoft has agreed to acquire Codecademy, an online learning platform for technical skills, for approximately $525 million in cash and stock. Codeacademy’s backers include Owl Ventures, Prosus and Union Square Ventures.

PRESS RELEASE

Boston – December 22, 2021 – Skillsoft (NYSE: SKIL), a global leader in corporate digital learning, today announced it has entered into a definitive agreement to acquire Codecademy, a leading online learning platform for technical skills, for approximately $525 million in cash and stock.

Codecademy is an innovative and popular learning platform providing high-demand technical skills to approximately 40 million registered learners in nearly every country worldwide. The platform offers interactive, self-paced courses and hands-on learning in 14 programming languages across multiple domains such as application development, data science, cloud and cybersecurity. In addition, the Codecademy platform can rapidly expand to deliver new skills at scale, making it highly adaptable to the evolving technical needs of learners and their employers. Codecademy, which was founded in 2011 and is headquartered in New York, is led by a proven entrepreneurial team that has built one of the most admired technical skills learning platforms in the industry.

“Codecademy will significantly expand Skillsoft’s capabilities in the high-growth Tech & Dev segment,” said Jeffrey R. Tarr, Chief Executive Officer of Skillsoft. “Strategic acquisitions are an important part of our growth strategy. We acquired virtual instructor-led training capabilities with Global Knowledge and coaching with Pluma earlier this year. With the addition of Codecademy’s innovative capabilities, we will create an even more immersive online learning experience. When we combine Skillsoft’s enterprise customer base of more than 12,000 corporate customers and over 46 million learners with Codecademy’s 40 million learners, sophisticated digital marketing capability and influential brand, we expect to unlock significant revenue synergies.”

Following the close of the transaction, the Codecademy team will join Skillsoft to help further build out the leading technical skills training solution for learners globally.

“Since our founding, Codecademy has been focused on empowering our learners to build inspiring careers in technology,” said Zach Sims, founder and CEO of Codecademy. “We have helped tens of millions of people around the world learn new technology skills. Together with Skillsoft, we will have the opportunity to rapidly increase the size of our content library and scale Codecademy across the millions of learners and thousands of companies – including approximately 75% of the Fortune 1000 – that work with Skillsoft worldwide. With additional resources and opportunities to drive growth, we are excited to embark on this important next chapter.”

Strategic Rationale and Benefits
Creates a Leading Technology & Developer Offering. Adding Codecademy’s expertise in 14 programming languages across multiple domains to Skillsoft’s existing technical skills offering will create a leader in the high-demand, high-growth Tech & Dev segment. In addition, the capability of the Codecademy platform to rapidly add new programming languages and technical skills at scale will further enhance Skillsoft’s ability to meet the evolving demands of learners worldwide as it helps organizations address the critical technical skills gap.

Expands Immersive Platform with New Ways of Learning. Skillsoft has already assembled an expansive set of learning options, including virtual instructor-led training, coaching, micro videos, audio, books, bootcamps, live events, assessments and badges. Together with Codecademy’s interactive, self-paced courses and hands-on learning, Skillsoft will be able to deliver even more immersive experiences through its AI-driven platform, Percipio.
Creates Substantial Cross-Selling and Upselling Opportunities by Adding a Strong Brand and Powerful Digital Sales and Marketing Engine to Global Enterprise Sales Force. The acquisition will bring together Codecademy’s sophisticated direct-to-learner digital sales and marketing engine and Skillsoft’s enterprise sales organization, creating new opportunities to upsell and cross-sell across each company’s customer base, which is expected to drive customer growth and revenue synergies.

Expected to Be Significantly Accretive to Bookings and Revenue Growth Immediately Upon Closing. Codecademy is expected to deliver approximately $47 million in bookings and approximately $42 million in revenue for the calendar year ended December 31, 2021, up 23% and 31%, respectively, over the prior year. Codecademy is entirely a SaaS business and is expected to deliver gross margins of more than 85% in 2021 and be accretive to Skillsoft’s gross margin immediately upon closing. Codecademy is investing to fuel growth and, accordingly, is expected to generate negative EBITDA of approximately $20 million in 2021. Skillsoft expects it will accelerate Codecademy’s growth in its first year of ownership and that the acquisition will be accretive to EBITDA over the long term.

Transaction Details
Under the terms of the agreement, which has been approved by the boards of directors of both companies, Codecademy shareholders will receive total consideration of approximately $525 million. The consideration for the transaction is approximately 40% cash and 60% equity. In connection with the transaction, Skillsoft has secured committed financing from Barclays and Citigroup. The Company expects pro-forma net leverage at closing to be approximately 4x, consistent with Skillsoft’s previous statements regarding leverage following a transformative acquisition.

The transaction is expected to close in the first half of 2022, subject to approval by Skillsoft shareholders, the satisfaction of customary closing conditions and the receipt of regulatory approvals, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Fiscal Year 2023 Outlook
Skillsoft reiterates its full year fiscal 2022 outlook provided on December 14, 2021, with bookings in the range of $700 million to $720 million; adjusted revenue in the range of $685 million to $700 million; and adjusted EBITDA of approximately $165 million. The Company will provide fiscal 2023 outlook, pro forma for the acquisition, when it reports its fourth quarter and full year 2022 results.

Advisors
Barclays is serving as the exclusive financial advisor to Skillsoft, Citigroup is serving as capital markets advisor and Weil, Gotshal & Manges LLP is serving as legal counsel to Skillsoft.

About Codecademy
Codecademy is a leading online learning platform for technical skills, empowering approximately 40 million people worldwide to lead inspiring careers in technology. Codecademy’s innovative, scalable approach to online coding education makes it possible for anyone to master the skills needed to succeed in our tech-enabled workforce. Since 2011, learners from more than 150 countries have accessed Codecademy’s extensive course offerings on web development, data science, cybersecurity, and more, as well as in-demand programming languages like Python, CSS, and JavaScript. In addition to helping individuals unlock the full power of technology, Codecademy for Business supports companies like General Motors and Kayak as they train and upskill their teams for the future. Codecademy is headquartered in New York City.