Reader’s Digest Bought by Equity Firm for $1.6 Billion

The Reader’s Digest Association Inc., operator of the world’s largest-circulation magazine as well as a direct-marketing business, has agreed to be acquired by a private equity firm.

Ripplewood Holdings LLC will acquire Pleasantville, NY-based Reader’s Digest for $1.6 billion, according to an announcement made yesterday. Reader’s Digest went public in 1990, but until 2002 remained under the control of a charitable foundation set up by the company’s founders.

Ripplewood’s offer of $17 in cash for each Reader’s Digest share constitutes a 10% premium over the company’s closing price yesterday. The equity investors will also assume Reader’s Digest’s debt, which the company reported totaled $776.3 million during its most recent quarter.

For that quarter, which ended in September, Reader’s Digest posted a net loss of $26.7 million.

Reader’s Digest Magazine has a reported monthly paid circulation of about 10 million, down slightly from 12.6 million in 2000. Global editions reach 100 million people in more than 70 countries, via 50 editions in 20 languages.

In addition, the company publishes other magazine titles such as Every Day with Rachael Ray and owns the Allrecipes.com Web site. RDA sells some of its book and magazine titles through both retail and direct-marketing channels.

Ripplewood operates a number of media assets including direct-marketing company Direct Holdings Worldwide, exclusive global marketer of Time-Life books, music and videos. The company also owns children’s educational publisher WRC Media, which produces the Weekly Reader and distributes it to school groups.

“We look forward to working with the Reader’s Digest team to further develop and strengthen the company’s robust collection of assets, including brands, content, affinity groups and distribution channels,” Robert L. Berner III, managing director of Ripplewood Holdings, said in a release about the deal.

Timothy C. Collins, Ripplewood CEO, said, “Together with our portfolio companies, Direct Holdings and WRC Media, Reader’s Digest will enjoy the benefits of a diversified, multi-channel publishing platform.”

Subject to shareholder approval, the acquisition is expected to close in the first quarter of 2007.