Reader’s Digest Agrees to Sale

NEW YORK The Reader’s Digest Association, publisher of Reader’s Digest, Everyday With Rachael Ray and Taste of Home, has agreed to be acquired by a private equity-backed group for $2.4 billion.

Under a definitive merger agreement, Ripplewood Holdings would acquire RDA’s outstanding common shares at $17 per share and assume its debt.

Private equity-backed investors have been pursuing media companies lately; they’re said to be strong contenders for the 18 magazines being sold by Time Inc.

While it remains focused on the boomer audience, RDA has lately sought to court younger readers with the successful launch of Everyday. The magazine, which debuted in October 2005, said it would raise its rate base to 1.7 million by August and increase its frequency to 10 issues per year from six.

RDA reported revenue of $517 million for its fiscal 2007 first quarter that ended Sept. 30, flat compared with the year-ago period. Operating losses totaled $30 million compared with $7 million a year earlier, reflecting increased spending on consumer marketing and investment in various titles.

The deal does not change RDA’s overall strategy, Eric Schrier, president and CEO, told employees in a letter.

“A very experienced and savvy private equity firm has looked hard at our assets and our plans and decided that RDA is the place to invest and that it will grow,” he wrote in the letter. “This is ultimately the most valuable form of validation because they are backing their belief in us with their money and their reputation.”

Schrier became president and CEO Jan. 1, from global editor-in-chief and president of RD North America, with plans to diversify its core businesses and deepen its relationships with customers.

Ripplewood’s media holdings include Time-Life, the video and music direct marketing unit it bought from Time Inc.; and WRC Media, publisher of the Weekly Reader and other educational publications. It also invests in financial services, entertainment and technology.

The deal is expected to close during the first quarter of 2007.