Michael Milken, the inventor of junk bonds who served 23 months in jail for violating US security laws during the 1980s, is to take a stake in Riverdeep, the Irish software company. Riverdeep is issuing 500,000 American Depository Receipts (ADRs) to Mr Milken's privately held Knowledge Universe in exchange for its Teacher Universe subsidiary. The Irish group will also pay $1 million (#1.13 million) in cash and assume some of Teacher Universe's debt. Riverdeep's ADRs were trading at $25 yesterday putting a total value on the deal of $13.5 million. Teacher Universe produces teaching and personal development products aimed at teachers in the US primary school system. The deal also includes an earn out, which would see Riverdeep issue more ADRs - which represent six ordinary shares - to Knowledge Universe if the acquisition achieves certain unspecified revenue targets. At a minimum, the US group will own 1.5 per cent of Riverdeep.
Knowledge Universe and Riverdeep have also entered into a "preferred partner relationship" and will actively promote one another's products. Mr Barry O'Callaghan, Riverdeep chief executive, said yesterday the acquisition made Riverdeep the only "one-stop shop" serving the needs of large US school districts.
Mr Milken, who was fined $200 million by the US authorities for breaches of security and registration laws, set up Knowledge Universe five years ago. He was known as the king of junk bonds - a form of high-risk, high-yield debt used to finance massive takeovers in the 1980s.
Mr Milken's co-founders in Knowledge University were his brother Lowell and Mr Larry Ellison, the founder of Oracle. Together they invested $500 million in a range of companies including computer training schools, preschools, an education testing service and LeapFrog. Mr Milken said yesterday: "Riverdeep has created a unique value proposition for the education market." He added: "The addition of the Teacher Universe assets will further strengthen Riverdeep's position as the industry leader." These days Mr Milken is well known for his philanthropy. The Milken Family Foundation has supported numerous medical charities and sponsored an awards programme for US teachers. He is also the founder of Cap Cure, the largest nongovernmental funder of research into prostate cancer. Former President Bill Clinton had been expected to pardon Mr Milken at the end of his term of office but this did not happen.
