Houghton Mifflin agrees to buyout

BOSTON —  Houghton Mifflin Co. on Wednesday agreed to a nearly $1.8-billion buyout that would pair a venerable name in textbook publishing with Riverdeep Inc., a smaller firm whose strength is educational software.

By joining Houghton’s paper-and-ink business with Riverdeep’s software, the newly formed venture hopes to better position itself against larger rivals Pearson, McGraw-Hill Cos. and Harcourt Education.

Barry O’Callaghan, Riverdeep’s chief executive, said the deal sought to “capitalize on the convergence of print and digital education platforms” and help Riverdeep draw strength from Houghton’s larger sales force.

Riverdeep’s popular educational software brands include Reader Rabbit, Carmen Sandiego and Cluefinders.

A newly formed holding company called HM Rivergroup, led by O’Callaghan, would acquire Houghton. O’Callaghan is a former investment banker from Ireland and a controlling shareholder of San Francisco-based Riverdeep.

HM Rivergroup would pay $1.75 billion for Boston-based Houghton, currently owned by private investment firms Thomas H. Lee Partners, Bain Capital Partners, Blackstone Group and by management.

The deal would create a company with more than $1.4 billion in revenue -- most of it from Houghton, which has about 3,500 employees. Riverdeep has 300 workers.

Houghton, the fourth-largest U.S. textbook publisher, traces its origins to 1832. It was home to early American authors such as Ralph Waldo Emerson and Henry David Thoreau, as well as J.R.R. Tolkien.

The merger is the latest in a string of ownership changes for Houghton, which was acquired by French media company Vivendi Universal in 2001 for $2.2 billion. The next year, Vivendi sold Houghton Mifflin for $1.28 billion to Thomas H. Lee and Bain Capital.

Riverdeep was founded in 1995 and underwent a management buyout led by O’Callaghan in 2002.