Reed Elsevier eyes sale of its $300m stake in Riverdeep
Saturday July 28 2007
ANGLO-Dutch publisher Reed Elsevier has signalled its intention to find a buyer for its $300m (€220.1m) holding in Irish-led HM Riverdeep.
The 11.8pc stake forms part of Reed Elsevier's recent deal to sell its Harcourt US schools education business to HM Riverdeep, which is headed by Barry O'Callaghan, for $4m.
The remainder is being financed through a $235m equity placement with Davy Stockbrokers' private clients and debt financing from Credit Suisse, Lehman Brothers and Citi.
It is understood that Reed agreed to take a stake in order to appease the debt backers of the HM Riverdeep deal, which will create a publishing giant with an enterprise value of about $10bn. Some $7.4bn of this will be comprised of debt.
"We don't take the view that's a long-term shareholding," Reed's chief executive Sir Crispin Davis was quoted as saying yesterday, raising the spectre of the stock being sold soon after the deal is completed.
The transaction is expected to close in late 2007 or early 2008 after regulatory reviews have been completed. On their own, Reed and HM Riverdeep have 20pc and 15pc shares of the American education market, respectively.
Meanwhile, Sir Crispin said he was confident that HM Riverdeep had the financing in place to complete the transaction.
This will come as a relief to Reed shareholders in a rapidly deteriorating global credit market where it is becoming increasingly difficult to put together leveraged buyouts.
Signs of a global credit squeeze mounted during the week as banks that had lent large sums to finance some high-profile buyouts, including American carmaker Chrysler and UK drugs retailer AllianceBoots, found it difficult to sell the debt down to investors.
The Harcourt deal puts O'Callaghan, 38, behind two of the five largest deals in Irish corporate history. It ranks behind the $4.95bn merger of the Corkman's e-learning group Riverdeep with US education publisher Houghton Mifflin (HM) late last year.
Prior to the most recent deal, O'Callaghan had a 47pc equity stake in the group.
The fresh equity being provided by Reed Elsevier and Davy's private clients is expected to reduce his holding to about 37pc.
- Joe Brennan
