Alchemy Partners, the UK turnaround specialist led by Jon Moulton, has announced a formal offer for Ireland-based educational software company Riverdeep Group valuing the business at just over $376m.
Alchemy has joined forces with Barry O’Callaghan and Patrick McDonagh, CEO and non-executive director respectively of Riverdeep Group to form Hertal, the bid acquisition vehicle. The offer is being made at $1.51, an 89 per cent premium to the share price on November 8, the last business day prior to the announcement by Riverdeep of the initial approach by management to take the business private.
Also backing the offer is MSD Capital, a US private equity and public market investment vehicle controlled by Michael Dell, head of the US PC manufacturer of the same name. MSD Capital is planning to take a five per cent stake in the business, whilst Alchemy, Barry O’Callaghan and Patrick McDonagh will each acquire a stake slightly above 20 per cent. The remainder of the company’s stock will be held for the company’s share option scheme and for those existing shareholders who wish to swap part of their existing holdings in Riverdeep for shares in Hertal
Riverdeep Group is an educational publisher, focused on the consumer and school education markets in the US. It publishes a range of digital educational brands used by teachers, families and students across multiple educational platforms. For the year ended 30 June 2002, the company reported turnover of $169.3m and an adjusted net income of $24.9m.
The company has seen its share price fall steadily during the last twelve months as a result of a broader fall in the public markets, exacerbated by what the firm’s directors describe as “a very substantial degree of short selling of the company’s shares.” In a statement to the Dublin stock exchange this morning, the company said that “if no offer were to be made for the company, the directors of Riverdeep believe there is a risk of a significant fall in the share price from [its current price of] E1.15 ($1.23) which could lead to significant write-downs in intangible asset carrying values.”
Senior and mezzanine debt financing has been provided by Barclays Bank and Royal Bank of Scotland.
Hertal intends to continue the business development of the Riverdeep Group in a manner broadly consistent with the strategy that Riverdeep has historically stated to the market. Hertal said it believes that Riverdeep’s future development is better suited to an unlisted company environment, without the obligations and costs of maintaining a stock market quotation.
Since inception in 1997, Alchemy has invested or committed to invest over £1bn. Investors in the Alchemy Investment Plan, which is currently committed to investing some £250m of equity capital per year, include major banking institutions, pension funds and a number of private individuals.