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Blackboard Inc.’s $180 million acquisition of main rival WebCT Inc. will turn on how antitrust enforcers define the market for education software. Washington-based Blackboard disclosed Wednesday that the Department of Justice has expanded its investigation into the deal, which would unite the two leading developers of “distance-learning” technology. Blackboard controls roughly 45 percent to 50 percent of the U.S. market for software used to conduct college and other school classes over the Internet, while WebCT, of Lynnfield, Mass., holds about 35 percent to 40 percent, according to Eduventures Inc., a Boston-based education industry research firm. Once Blackboard fulfills the agency’s “second request” for information, the government would have 30 days to file suit to block the deal unless the companies grant regulators an extension. In announcing the deal Oct. 12, Blackboard said it expected to complete the transaction later this year or in early 2006. “We’ve been working cooperatively with the regulators — we’re hoping to get through the process as quickly as possible,” said Michael Stanton, director of investor relations at Blackboard. David Balto, a partner at Robins, Kaplan, Miller & Ciresi in Washington, estimated the DOJ action could delay Blackboard’s closure of the deal by up to six months. Chicago law firm McDermott Will & Emery is advising the company on antitrust matters in the deal. If the merger is derailed for any reason other than WebCT backing out, Blackboard would have to pay a $15 million break-up fee to WebCT. Although the Justice Department is scrutinizing the transaction, the second request does not ensure that enforcers will move to block the transaction, cautioned Constance Robinson, an attorney with Kilpatrick Stockton and former director of civil enforcement in the Justice Department’s antitrust division. Assessing the impact of mergers on software industry competition is more challenging than in many other businesses because it is “not as easy as comparing steel rods,” she said. Blackboard shares slipped 24 cents to $28.69. Copyright �2005 TDD, LLC. All rights reserved.

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