This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

How Reader's Digest Bungled a Buyout

The company's board feared Ripplewood's "requested due diligence activities could distract our management and disrupt our operations." Worse, the board harbored doubts about its own stock valuation and worried that "Ripplewood's proposed price might not be achievable, and might not receive the required financing after completion of due diligence by Ripplewood."

But Ripplewood didn't go away.

In July, it was back again with the same $18.50 a share offer, even though Readers Digest's stock had fallen to $13.44 a share -- a 6% slide since Ripplewood's initial bid. Again, Ripplewood sought to open exclusive negotiations with the publisher and once again it was rebuffed.

But this time, the company's board didn't engage in any hand wringing about the current state of its market value, according to the regulatory filing. Instead, it formally hired Goldman Sachs and directed the investment bank to contact other potential private equity buyers.

Over the next few months, the investment bank lined up at least five other potential buyers, none whom are named in the filing. But the group of investors led by Ripplewood, which also includes Merrill Lynch (MER), is the only private-equity consortium to ever submit a formal bid.

Meanwhile, as the bankers at Goldman Sachs tried to generate a late-summer bidding war for Reader's Digest, the publishing company's stock continued to sink. By Sept. 22, the stock was down to $12.45 a share and prospects for a buyout grew bleaker.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,191.37 -195.84 -1.13%
S&P 500 2,002.16 -27.39 -1.35%
NASDAQ 4,637.9940 -43.5030 -0.93%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs