Blackbaud Inc. is making a bigger push into online fundraising.

The Daniel Island software company said after the stock market closed Thursday that it has agreed to acquire Kintera Inc., a San Diego company whose web-based software nonprofits use to raise money online, for about $46 million in cash.

Blackbaud will pay $1.12 for each Kintera share through a tender offer, which it expects to launch next week and close on or around July 2. It plans to pay with cash and borrowings from its credit line.

The price is a premium of about 70% over Kintera’s closing price on Wednesday, Blackbaud Chief Financial Officer Tim Williams told investors on a conference call Thursday, according to a script of his remarks the company filed with federal securities regulators.

What Blackbaud gets

Kintera’s main product is Sphere, a platform delivered over the internet that nonprofits use to run online fundraising, special events, email campaigns and membership records. Users include the American Lung Association, Big Brothers Big Sisters of America, the Lance Armstrong Foundation and Sesame Workshop, Blackbaud said. Organizations processed more than $400 million in online gifts through Sphere in 2007.

Kintera has about 4,000 customers and reported $44.9 million in revenue for 2007, according to Blackbaud. It also sells FundWare, accounting software for nonprofits, and P!N, a wealth screening service.

“The acquisition of Kintera is very exciting for us and for the nonprofit industry as a whole,” Blackbaud President and CEO Marc Chardon said in the announcement. “Expanding Blackbaud’s online offering in this way further establishes Blackbaud as the leading solutions partner for non-profit organizations.”

Chardon said the two companies’ online products have historically served different parts of the market. On the call, he said almost 2,300 organizations run their online presence on Sphere, and that the deal would advance Blackbaud’s own online efforts “by a number of years.”

A money-losing seller

Kintera incorporated in Delaware in February 2000 and went public in December 2003. It has lost money in every quarter since its founding, according to its most recent annual report. It lost $16 million in 2007 and $33 million in 2006, and its accumulated deficit reached $144 million at the end of last year. It had 281 employees at the end of 2007.

Williams said on the call that worries about Kintera’s finances had hurt its sales.

“The concern of prospects and customers over the long-term financial viability of Kintera was a significant weight on the recent results of Sphere, particularly over the course of the past year, and this concern will disappear on day 1 of our combined operations,” he said.

Kintera’s past losses also come with a tax benefit. Williams said Blackbaud expects to use a little more than $54 million in Kintera’s net operating losses and other acquisition-related tax savings over the next 20 years, and he estimated the present value of that benefit at about $10 million. Counting that, he put the net purchase price at about $36 million.

What changes, and what doesn’t

Kintera President and CEO Richard LaBarbera will keep running the company, and its operations will still be directed from San Diego, Blackbaud said.

“Joining with Blackbaud gives us a way to leverage our capabilities with those of the industry leader and thus significantly improve the customer’s experience,” LaBarbera said in the announcement.

Williams said Blackbaud expects to trim about $2 million a year from the combined companies’ planned research and development spending, by reducing future hiring, and to save more than $1 million a year in Kintera’s public company costs.

The financial picture

Blackbaud expects the deal to reduce its 2008 earnings by 3 to 5 cents a share on a non-GAAP basis, which excludes acquisition amortization and stock-based compensation. Williams attributed that to purchase accounting rules, particularly an expected write-down of Kintera’s deferred revenue. Blackbaud expects the deal to break even in 2009 and add materially to earnings beginning in 2010.

The purchase also shifts Blackbaud toward subscription revenue. Sphere is sold only as a subscription service.

“Subscription revenue was already the fastest growing source of revenue at Blackbaud and it was expected to become larger than license revenue at some point in the second half of 2008,” Williams said in the announcement. “With the acquisition of Kintera, this will become a certainty as we will add another significant source of subscription-based revenue from an on-demand service offering.”

The buyer

Blackbaud had revenue of $257 million in 2007 and 1,655 employees at the end of the year, according to its annual report. About 19,000 organizations use its products, including the American Red Cross and Dartmouth College, the company says.

On the call, Chardon listed earlier steps in Blackbaud’s growth plan, including its purchases of the Target companies, which specialize in direct marketing and analytics, and eTapestry, which sells fundraising software as an online subscription to smaller nonprofits.