Company's view of share value likely to upset investors

More than two months after it was first mooted, Riverdeep shareholders finally know the company's view of the value of the shares - $1.51 (€1.41).

That is likely to do little to please investors who bought into the company at the €7.75 a share at the height of the dotcom bubble. In less than three years, Riverdeep's market capitalisation has tumbled from €1.27 billion to €340 million on the basis of the management buyout offer.

Most will place their hopes in the prospect of a rival bid emerging for the group in the next month. When founder Pat McDonagh threw his lot in with chairman and chief executive Barry O'Callaghan shortly after he announced his intention to examine an MBO, it was assumed the pair would take the company out regardless of the price offered because of their blocking vote.

News that the independent directors had locked the pair into an agreement to sell their stake to anyone offering €1.67 or more will hearten investors who have seen the shares nosedive since the acquisition of Broderbund.

The price was seen as disappointing by analysts. Since Mr O'Callaghan decided he had had enough of the vagaries of the market and the antics of short sellers, analysts have consistently valued the company above €2 a share, with most using the €2.23 achieved in a placing by major shareholders last September as a benchmark.

Mr O'Callaghan has consistently derided the low valuation put on the firm. However, there was no certainty that the larger rivals would now step into the ring. Last night Mr O'Callaghan also scotched rumours that he would stand down if his bid was unsuccessful.

"This is not a case of 'if I don't win, I resign'," he said. He acknowledged it was always difficult for shareholders to lose money. "I have no satisfaction in seeing the price fall more than half. . . This is a transaction I would rather not have done. Back in November we were running a fine business and no-one wanted to know. The MBO was an action of last resort."

Riverdeep has been plagued with bad news in recent times. The diversification into consumer business and the acquisition of the Broderbund business puzzled the market and saw the company's value fall.

The attentions of short sellers only exacerbated the decline and a delisting from the Nasdaq market - with the full support of major investors, Mr O'Callaghan insists - failed to shake them off. A botched conference call also contributed.

Now at least an offer is on the table. The advice from analysts seems to be that shareholders should bide their time before accepting the current terms - cash of €1.42 per share or a stake in the private company.

Whatever happens on the day the Higgs report on independent directors in the UK was published, Paul D'Alton and his colleagues have been seen to be working to maximise value for the shareholders. Whether a rival bidder enters the fray is uncertain but Riverdeep's independent directors have at least given investors a chance of a fair return on their money.