Prospective investors in Riverdeep's mammoth reverse takeover of US publisher Houghton Mifflin have been told that the newly-merged group will be floated on the public markets within two or three years.
Documents circulated to an investment conference at Davy Stockbrokers last Friday say that the broker wants to raise $200 million (€159.1 million) in a private placement for the transaction, which is expected to close in three weeks.
Up to 150 private clients of Davy and a number of other wealthy individuals were obliged to sign a confidentiality agreement at the conference.
They were told that Riverdeep chairman and controlling shareholder Barry O'Callaghan (37) would provide $200 million for the transaction. Middle East investment group Obeikan, which has significant publishing interests, will provide an additional $200 million.
The deal will transform Riverdeep, providing instant scale in the vast book market in the US. Mr O'Callaghan will be chief executive and chairman of the merged entity and his friend and counterpart at Houghton Mifflin, Tony Lucki, will be its president. The deal is being backed by international banks Citigroup, Goldman Sachs and Credit Suisse First Boston, which will provide debt of $3.136 billion.
Some $3.55 million in "preferred equity" will also be used to fund a transaction whose total value will be in the order of $4.5 billion, somewhat lower than the figure of $5 billion mentioned previously.
The reverse takeover will be executed by a new Irish-registered entity - named NewCo for the moment - in two parts.
NewCo will acquire Houghton Mifflin from private equity groups Thomas H Lee, Bain Capital and Blackstone for $3.33 billion in cash. In addition, NewCo will buy out Riverdeep in a share-based transaction that values the company at $1.2 billion, or $6 per share.
"We believe that this new entity will list on the public markets in the next two or three years," potential investors in the private placement were told. They were also told that the merged entity will be 100 per cent Irish-owned.
This fundraising process is the final part of a complex transaction which will be the second-largest in Irish corporate history after Jefferson Smurfit's acquisition late last year of the Kappa group. Among the oldest and most venerable of US book publishers, Houghton Mifflin hopes to gain access to the booming market for online educational material through Riverdeep. The publisher is profitable, but sales are under growing threat from internet-based sources of material.
Riverdeep declined last night to comment.
