Highfields Renews Reader's Digest Control Bid

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Highfields Capital Management has issued an increased offer for shares of The Reader's Digest Association Inc. as part of its renewed effort to gain control of the company.


The investment firm offered to exchange voting B shares owned the Wallace-Reader's Digest Funds for non-voting A shares plus $5. Wallace currently controls approximately 6.2 million voting shares in Reader's Digest, amounting to 50 percent of all voting shares.


According to Highfields, each A share trades at about $21.55, and the total cash portion of the offer amounts to $31 million. The investment firm had previously made an offer of $3 per voting share but was rejected.


The takeover bid revolves around Reader's Digest's efforts to purchase Greendale, WI, publishers Reiman Publications for $760 million, a move that led Standared & Poor's Corp. to downgrade Reader's Digest's debt rating to junk status. Highfields opposes the acquisition.


Highfields said that if its takeover bid were successful, it would refocus Reader's Digest on existing businesses. The company said it then would be willing to collapse all voting and non-voting shares into one pool consisting entirely of voting shares, thereby ceding control of Reader's Digest "for the benefit of all shareholders, including Wallace Funds," Highfields said.


A spokeswoman for Wallace did not return phone calls for comment yesterday.
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