Jon Moulton's venture capital firm, Alchemy Partners, and Michael Dell, the US software billionaire, stand to make a profit of more than $100m (£55m) from the management buyout of software firm Riverdeep - doubling their money in just 10 months.
Riverdeep founders Barry O'Callaghan and Pat McDonagh are exercising an option to buy out Alchemy and Mr Dell's MSD within 12 months of the transaction which took the e-learning company off the Dublin stock exchange.
Alchemy and MSD will receive $95m for their 28 per cent stake in the firm and a further $121m repayment of a loan note, which attracted a coupon of 12 per cent.
The huge profit will grate with some former Riverdeep shareholders who were bought out at $1.51 per share in April 2003, just over three years after the company floated at $3.33 per share on the Dublin and Nasdaq exchanges. Mr Dell and Alchemy are selling out at $2.65 per share.
Mr O'Callaghan and Mr McDonagh will fund the purchase of three-quarters of the equity buyout at a cost of $72m. The deal will raise the two directors' stake in the company to almost 32 per cent each.
Riverdeep shareholders who rolled over their investment in the company in the buyout - some 950 investors including publisher Reed Elsevier - are being offered the opportunity to subscribe for more shares in the company.
Riverdeep earnings before interest, depreciation and amortisation (Ebitda) almost doubled to $58.9m in 2003 on the previous year, on the back of cost-cutting.
Riverdeep is one of the leading players in the US educational publishing market and was set up by Mr O'Callaghan and Mr McDonagh in 1998.
Mr O'Callaghan, a former investment banker with Credit Suisse First Boston, took Riverdeep private last year claiming that the firm was the victim of a sustained attack by New York hedge fund manager David Rocker.
Mr Moulton's Alchemy, regarded as one of the shrewdest players in the UK private equity market, stands to earn almost $90m on the deal. Mr Dell had an 18.5 per cent share in the partnership and will clear almost $20m.Reuse content