The Barry O'Callaghan-led Education Media and Publishing Group (EMPG), formerly known as HM Riverdeep, has sold its college division for $750 million (€511 million) in cash and plans to use the funds to reduce its debt by about 10 per cent.
EMPG's Boston-based Houghton Mifflin subsidiary said yesterday that it had agreed to sell its college division to Cengage Learning, subject to "customary" closing conditions. It expects the deal to be finalised in the first half of 2008.
Houghton Mifflin has also signed a five-year deal to distribute Cengage's titles into high schools in the US.
Jeremy Dickens, EMPG's president, said that the college division was no longer core to the group's activities and the deal would allow it to cut its $7.15 billion debt by about 10 per cent.
"It's an important transaction for us for a couple of reasons," Mr Dickens said. "It gives us the opportunity to focus on our core K-12 [kindergarten to 12th grade] publishing assets. It will allow us to pay down some debt, which is no bad thing."
Mr Dickens said "substantially all" of the money from the sale would be used to pay down EMPG's debt. He said the sale was "unrelated" to difficulties being experienced by EMPG's lenders - Credit Suisse, Lehman Brothers and Citigroup - in syndicating the publisher's $7.15 billion debt. "We have been working on this since the summer," he added.
The global credit crunch and falling stock markets have made it difficult for the banks to sell down this debt and they are expected to postpone the syndication until early in 2008.
"It [ the sale] will have some positive impact from that perspective," Mr Dickens said. "There is no shame in paying down about 10 per cent of your debt."
Mr Dickens said the syndication was likely sometime next year. "It's a little bit of a moving target," he said. "There is demand for the paper. My guess is that part of the syndication could happen before the end of the year and the remaining on a date in 2008 and perhaps a couple of times in 2008."
Mr Dickens said the price received for the college division was about 30 per cent more than the value placed on the business unit at the time of the $4.95 billion merger between the venerable US publisher Houghton Mifflin and Irish e-learning group Riverdeep in late 2006.
That created a company called HM Riverdeep, based in Dublin, led by Mr O'Callaghan and backed by a number of wealthy clients of Irish stockbroker Davy. HM Riverdeep will next week conclude a $4 billion acquisition of the US-based Harcourt Education from Anglo-Dutch publisher Reed Elsevier.
As a result of this deal, the company's name was changed to EMPG and its domicile moved to the Cayman Islands. Following the sale of the college division, Mr Dickens said EMPG would have annualised revenues of about $4.2 billion and earnings before interest, tax, depreciation and amortisation of $1.2 billion.
