Ripplewood Muscles Up With Reader's Digest Deal

Holding Company Snags Publisher's Bulging Name List as Part of Acquisition

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NEW YORK (AdAge.com) -- Forget for a minute all the chatter over media companies privatizing, even though it happened again last week when Reader's Digest Association agreed to be bought for $2.4 billion by private equity. Consider this instead: Assuming the investor group led by Ripplewood Holdings closes that deal, it will create a direct-marketing leviathan.
Reader's Digest owns a magazine-subscription-sales business, QSP, which is used by schools as a fundraising tool.
Reader's Digest owns a magazine-subscription-sales business, QSP, which is used by schools as a fundraising tool.

100 million names
Reader's Digest, after all, already operates a database in the neighborhood of 100 million active names, and probably 80% of what the company does involves direct marketing. Its books division, for example, brings in about $1 billion in revenue each year, and about 95% of that comes from direct marketing. Its home-entertainment business includes videos and the rights to more than 11,000 songs.

For its part, Ripplewood's holdings include stakes in Direct Holdings Worldwide, the global direct marketer using the Time Life brand, and WRC Media, publisher of educational materials such as Weekly Reader and "World Almanac." Reader's Digest owns a magazine-subscription-sales business, QSP, which is used by schools as a fundraising tool. Through that division, RDA also sells World's Finest Chocolate and other food and gift items.

"They know a significant amount already about their customers," said Chuck Shaw, senior VP-director of client services at ID Media, the direct and digital-services agency. "They're going to be able to take this knowledge and insight about their customer base and use it with their new partner, which will allow them to upsell and cross-sell."

Benefit outside partners
But the combo could also benefit outside partners such as marketers and their agencies. "For us on the agency and client side, it will give us a much better opportunity to segment their entire combined file," Mr. Shaw said. "It's a huge benefit if I'm able to work with a partner and they're able to come back and say, 'I understand who your target is, and here's all the various components -- e-mail, direct mail, on-page with print -- to best execute your program."'

The degree and speed with which Ripplewood and Reader's Digest actually mine their combined assets for new value remains a question, one the principals can't discuss before the deal passes hurdles including shareholder approval. The goal is to close the deal in the first quarter of 2007. A Reader's Digest spokesman declined to comment; reps for Ripplewood did not respond to messages left seeking comment.
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