How Reader's Digest Bungled a Buyout
Reader's Digest (RDA) is providing Wall Street with an abridged version of how not to do a corporate takeover.
But these useful tips won't be found in a recent copy of the publishing company's pocket-sized magazine. Rather, they are disclosed in a recent regulatory filing chronicling Ripplewood Holding's proposed $1.6 billion buyout of Reader's Digest.
The Pleasantville, N.Y. publisher reveals the private-equity firm twice offered to pay $18.50 a share for the company, almost 9% more than the $17 a share takeover price that Readers Digest's board ultimately agreed to in November.
It appears Reader's Digest's fumbling of the lengthy negotiations with Ripplewood may have cost shareholders up to $150 million in a buyout premium. The lower takeout price also raises questions about the performance of Goldman Sachs (GS), the company's investment bank, in trying to auction the company to the highest bidder.Officials with Reader's Digest and Goldman Sachs could not be reached for comment. Reader's Digest, in a regulatory filing late Friday, discloses that in March it received an unsolicited proposal from Ripplewood to buy the company for $18.50. At the time, Reader's Digest shares were selling for $14.40. But the company's board rejected the proposal and Ripplewood's request to enter into a period of exclusive negotiations aimed at ending in a leveraged buyout.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV