Posted by: Jon Fine on November 16, 2006
The private equity-i-zation of media companies is rapidly leaving the realm of the hypothetical, if you go by the $21 billion worth of private equity deals for media companies announced before noon today.
My colleague Tom Lowry and I will be taking a crack at the $18.6 billion Clear Channel deal elsewhere on businessweek.com. (UPDATE: It’s here.) But just so Reader’s Digest Association, taken private for $2.4 billion (including debt) by Ripplewood Holdings today, isn’t totally ignored …
How the mighty valuations have fallen. Ripplewood gets Reader’s Digest for, essentially, a one-time multiple of its most recent fiscal year’s revenues—cheap, historically speaking. In early 1999, Reader’s Digest came thisclose to a major deal with Time Warner unit Time Inc. At the time, its stock price was trading in the mid- to high twenties. Yesterday it closed at $15.40.
Former CEO Tom Ryder, who retired last December 31 (Eric Schrier is now CEO, but Ryder remains Chairman through the end of ’06), strove mightily in the early years of his tenure to get a deal done for the company. A Reader’s Digest deal would have been much less sexier for Time Waner than the AOL deal—but also a hell of a lot less disastrous. Reader’s Digest had ferocious direct-mail bona fides, and a database consisting of tens of millions of names … which may have made Time Inc. later attempts to prop up its massive magazines’ enormous circulations much simpler. (On the other hand, it would also compound Time Inc’s current troubles of reinventing general-interest, big-circulation titles like Time.)
Reader’s Digest also had talks with Bertelsmann in 2000, in which they brought in management consultant’s McKinsey & Co. to evaluate combining some units joint-venture style. These discussions also proved fruitless. Still, in late 2000, Ryder went as far as to tell me “if something doesn’t happen,” in terms of some kind of deal, by the end of the company’s fiscal 2001, “someone’s sleeping.”
I can’t help but sense serious irony in that a Reader’s Digest deal ended up happening not one year after Ryder’s tenure as CEO ended.