The Minnow Feasts

Don't you just love corporate buyouts? The complexity of the deal is nearly fantastic, the sort of thing that only an entire coven of legal minds could concoct. Over in Ireland, it's the whole Riverdeep/Houghton Mifflin merger that has tongues wagging and fingers scratching heads in confusion.

Barry O'Callaghan is feeding a bit of the financial largesse to his managers, and himself of course. He's not working this hard for nothing. The incentives to the lucky group amount to around $132 million, with himself getting the lion's share. All the same, I wish I were one of Riverdeep's managers right now, and just in time for Christmas, all the little minnows getting a lovely bonus.

The new company, HM Riverdeep, bought up Houghton Mifflin for $3.4 billion, which means the original investors who picked it up from Vivendi made a very tidy profit. Then HM Riverdeep picked up Riverdeep for $1.2 billion, and voila as the French might say. Credit Suisse and Citigroup are ponying up $3.14 billion, with the remainder coming from equity and cash holdings of the two original companies. Glad I'm not holding the mortgage on this deal; I'd never sleep at night with worry.

With the incentive package, Mr. O'Callaghan and his team are locked in to run the entire operation. He's to invest an additional $200 million, to raise his stake in HM Riverdeep, and they'll all end up with a controlling interest.

Riverdeep gets the use of Houghton Mifflin's sales force with this restructured entity, an asset they plan to use to expand their market share. The new company will be looking to save some money by restructuring the intellectual property assets under Irish tax laws, which are more generous to big companies than the IRS. Then they'll cut a few jobs here and merge departments there, and the next thing you know, they're getting out from under the debt burden, assuming that sales take off as planned. There's ways to save money, and then there's ways to save money. If you're working for Riverdeep or Houghton Mifflin, you might want to get your resume in order.