The bidding contest for a Wisconsin-based online learning firm has moved from the boardroom to the courtroom.
Renaissance Learning Inc. said Tuesday that it has rejected a sweetened offer of $496 million made Monday by online education company Plato Learning Inc. of Bloomington.
Renaissance Learning, a Wisconsin Rapids, Wis. provider of technology-based school improvement and school assessment programs for K-12 schools, said it still favors an offer of $455 million from another private equity company.
Meanwhile a Renaissance shareholder has filed suit in federal court seeking a temporary restraining order that would stop the sale of Renaissance Learning to Permira Advisers and its affiliates.
Data Key Partners, a minority shareholder in Renaissance, filed the suit in U.S. District Court in Madison, Wis. A hearing is scheduled for Friday morning.
Data Key's lawyer, Richard Brualdi, said his client would like to see the agreement between Renaissance and Permira voided.
"Data Key would like to see the full disclosure of the reasons why Permira is being so favored even though it is the low bidder and why Plato is being so disfavored even though it is the high bidder," Brualdi said. The shareholder suit was filed Friday before Plato made its most recent offer.
Renaissance declined to comment on the suit Tuesday.
The bidding contest comes at a time when technology companies in the education sector have attracted lots of investor interest.
Last week, for example, Providence Equity Partners completed a $1.6 billion acquisition of Blackboard Inc., a Washington, D.C., based provider of enterprise technology for online learners. Pearson PLC on Sept. 15 completed the acquisition of Connections Education from an investor group for $400 million. Connections operates online or ''virtual'' public schools in 21 states.
Plato Learning itself was acquired by private equity firms in May 2010 for $144 million.
Glenn Gurtcheff, a mergers-and-acquisition professional and managing director of the Minneapolis office of Harris Williams & Co., said there is a lot of interest in the for-profit education market right now.
"The private equity community understands there will continue to be new avenues for providing education to students in a variety of different formats and in a variety of different business models," Gurtcheff said.
On Aug. 15, Renaissance announced that it had a definitive merger agreement worth approximately $440 million with Raphael Holding Co., a company created by European private equity group Permira Funds.
Within days, Plato, backed by its own private equity owners Thoma Bravo and HarbourVest Partners, made an unsolicited offer to acquire Renaissance for $455 million.
Permira increased its offer to an aggregate purchase price of approximately $455 million. On Monday, Plato made its latest revised bid for $496 million.
Renaissance co-founders Terrance and Judith Paul and various family members and affiliates control 69 percent of the publicly held company. The Pauls have informed Renaissance board members that they will not support Plato's acquisition offer.
Plato's latest offer does not make a specific provision for the "Paul shareholders," but allows the Renaissance board or the Pauls to allocate the merger proceeds in any manner. Permira's amended offer would give the Paul shareholders $15.00 per share in cash, and will acquire all the other outstanding shares of Renaissance Learning for $16.60 per share in cash for an aggregate purchase price of approximately $455 million.
"The Renaissance board of directors has approved and continues to recommend that shareholders approve and adopt the amended Permira Funds merger agreement," the company said.
Data Key's suit alleges certain relationships between the Paul shareholders and Permira have not been disclosed and that one of reasons Plato's offer has been rejected by the Pauls and Renaissance is that "Plato is not offering the Pauls the plethora of personal benefits that Permira is."
There is a special meeting of Renaissance Learning's shareholders scheduled for Oct. 17 to approve a takeover plan. Renaissance share closed Tuesday at $16.74, down 27 cents.
Patrick Kennedy • 612-673-7926