After spending every last penny on a substantial meal, the little minnow finds that no take-over is complete without a little sweet at the end. With that in mind, Barry O'Callaghan is said to be seriously considering a buy-out of Reed-Elsevier's educational unit. Harcourt Education would then become part of the HM Riverdeep school, lolling in the warm sun of the Cayman Islands.
One can see why Mr. O'Callaghan would be eager to acquire Harcourt Education. He went after Houghton Mifflin with an eye to creating the biggest educational publishing firm on the planet, and adding the assets of Harcourt would bring that dream closer to reality. Last April, Reed Elsevier's international education assets were acquired by Pearson, and various equity funds have been feasting on other educational publishing firms of late. There'll be no tasty tidbits left if Mr. O'Callaghan doesn't act fast.
Rumor has it that the deal could be announced very soon. The question is, how is the minnow that swallowed the whale going to pay for another acquisition that is valued at $4 billion? With Moody's rating on HM Riverdeep debt at less than comfortably safe, who will pony up more to fund the next purchase? Is this what the restructuring was all about, to free up cash reserves to cover an added expense? But where will that put the investors, who will be looking at added risk to a venture that is already risky?
The employees at Harcourt may even now be swimming for their financial lives.