Riverdeep shareholders will receive the formal offer for their shares from a consortium led by chairman and chief executive Mr Barry O'Callaghan in the next few days.
The document sent last night to investors in the educational software group outlines terms of the proposed $376.3 million (€349.1 million) management buyout (MBO).
Shareholders will vote on the proposal at an extraordinary general meeting on March 4th, days after the release of figures for the company's performance in the last three months of 2002.
The MBO team is offering $1.51 per Riverdeep share or the option to take shares in the new private company, Hertal. The value of the cash offer has been undermined, since its announcement, by the waning fortunes of the dollar against the euro. Initially, it was worth €1.42 per share but this has now slipped to a fraction above €1.40.
Although the deal is denominated in dollars, shareholders will be paid for their shares in euros unless they request otherwise. The prevailing rate of exchange on the day the deal goes unconditional will determine the final euro value of the deal to shareholders.
Mr O'Callaghan and his backer, company founder Mr Pat McDonagh, have undertaken to withdraw their proposal should a rival bidder offer $1.67 or more per share. However, in such circumstances, Hertal would receive a sum of up to $3.763 million to cover the cost of third-party advisers.
Though the terms of the offer will see original investors in Riverdeep crystallise substantial losses, director Ms Gail Pierson is a certain winner. Ms Pierson, who has agreed to support the MBO, has options over 2,350,000 shares in Riverdeep. Of these, 1,350,000 are exercisable at prices well in excess of the $1.51 offer price. But the remaining million shares are exercisable at $1.12 each. Assuming Ms Pierson takes up these options and sells them, as she has indicated to Hertal, she will walk away with a profit of $390,000.
The one external irrevocable acceptance of the Hertal offer to date has come from British institution Taube Hodson Stonex. However, it has indicated that it wants to convert its holding of nearly 2 per cent into shares in Hertal.
Irish institutions have largely dismissed the offer but hold only around 15 per cent of the company between them.
The offer requires the approval of a simple majority of those voting at the extraordinary general meeting. Under Takeover Panel rules, Mr O'Callaghan and Mr McDonagh will not be able to vote shares under their control at the meeting. The two men control just over 25 per cent of the group.
