Houghton Mifflin Co., publisher of the Curious George children's books and the American Heritage Dictionary, will be sold for $1.75-billion to Riverdeep Holdings PLC, an Irish maker of educational software.
The textbook publisher, based in Boston, will be combined with Riverdeep into a company, based in Dublin, controlled by former Credit Suisse Group banker Barry O'Callaghan, the companies said Wednesday. Riverdeep will also assume $1.610-billion of debt.
The deal gives Riverdeep the fourth-largest U.S. educational publisher with annual revenue of more than $1-billion. U.S. buyout firms Bain Capital LLC, Thomas H. Lee Partners LP and Blackstone Group LP are selling the company after paying Vivendi SA $1.68-billion for the assets in 2002. The company's main competitors are McGraw-Hill Cos., Pearson PLC and Reed Elsevier PLC's Harcourt unit.
"Riverdeep gets roughly a quarter of the U.S. educational publishing market, and a much larger business with a fairly well-defended position," said Robert Broadwater, managing director of Broadwater & Associates, an investment bank specializing in media companies. "Historically, margins at Houghton have been pretty good."
Riverdeep and Houghton Mifflin will become HM Rivergroup PLC, which will have annual revenue of $1.8-billion. O'Callaghan and management will have a 50 percent stake in the company.
O'Callaghan said he bought Houghton Mifflin because the companies' main businesses complement each other. Riverdeep's software products are sold to individual state education departments.
Riverdeep, which O'Callaghan said generates about 80 percent of its $300-million in revenue from U.S. schools, will combine its 50-person sales force with Houghton Mifflin's 500 salespeople.
"At first blush, we're smaller, they're bigger, we're software, they're traditional print," O'Callaghan said.
"The real synergy between our businesses is that we're an educational publishing company just like them, but we're doing it on different mediums aimed at different funding sources."
O'Callaghan said he has no plans to take the company public.