MBO still only offer for Riverdeep

Riverdeep has attracted no offers apart from the management buyout (MBO) proposal from chief executive Mr Barry O'Callaghan's Hertal group.

Eight groups expressed interest in acquiring the educational software company during the past month but no formal offers followed. Mr O'Callaghan and company founder Mr Pat McDonagh, who between them control more than 25 per cent of the company's shares - enough to block a rival offer - had agreed to sell to anyone offering 10 per cent more than their $1.51 (€1.40) proposal during a 31-day period that ended yesterday.

Mr O'Callaghan accepted that a rival was unlikely but said he was happy to consider any offers that did emerge.

The "handcuff" period had been requested by the company's independent directors to facilitate competing offers. The independent directors, led by Mr Paul D'Alton, yesterday unanimously recommended that shareholders accept Hertal's cash offer.

They made no recommendation regarding the partial share alternative. The first closing date for the offer is Monday but analysts do not expect the situation to be clear by then as less than two trading days will have passed since the end of the lock-in period.

It emerged last night that IBM, which sold just over 2 per cent of the group in a private placing last September at €2.23, has sold its remaining 4.5 per cent shareholding since the Hertal offer emerged.

The group's other major shareholders - Bank of Ireland Asset Management and Capital Group - have also been selling their shares in recent weeks.

Capital Group yesterday informed the Irish Stock Exchange that it had sold nearly 1 per cent of the company - 2,345,540 shares - in the past two days. The disposals bring its holding in the company to 4.34 per cent. At the time of the Hertal offer, it held 7.5 per cent.

Mr O'Callaghan said last night that close to 25 per cent of the company was now in the hands of risk arbitrageurs.

"That indicates to me that they think this deal will run," he said. "With the handcuffs out of the way, for shareholders, it is now a fairly straightforward offer; you can take it or reject it."

The company yesterday also reported results for its second quarter - the three months to the end of December. It recorded profit after tax of $4.43 million on turnover of $61.1 million. The figures compare with a loss of $3.15 million on sales on $41.26 million in the same period a year earlier, a quarter that included a $4.1 million restructuring charge.

The figures translate to earnings per share of two US cents against a one cent loss a year earlier and were broadly in line with forecasts.

The results included a charge of $1 million related to costs incurred by the company on legal and financial advice regarding the MBO. They also reflect the first full quarter's contribution by Broderbund, the consumer software group bought by Riverdeep last year, with the help of $50 million funding from Foothill Capital. All the assets of the company are essentially security against that funding.