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*Reader's Digest Buys Stake in BrandDirect

Reader’s Digest Association Inc., Pleasantville, NY, yesterday announced its agreement to acquire an 18 percent equity interest in BrandDirect, Shelton, CT, a membership-based marketing company. This latest acquisition marries Reader’s vast database and its international reach with BrandDirect’s expertise in telemarketing and membership clubs.

“This is consistent with our strategy of developing new marketing channels to sell existing products and new products that we create,” said Thomas O. Ryder, chairman/CEO at Reader’s Digest. “We’re once again reducing our dependence on the sweepstakes business.”

BrandDirect’s 2.2 million members of its 10 clubs pay an annual membership fee for access to sharply discounted goods and services promoted via direct mail and telemarketing. Existing clubs include the Arthur Frommer Budget Travel Club, Children’s Television Workshop Kids Club, Field & Stream Club and the IBM Small Business Solutions Club.

The deal is only the latest in a string of strategic alliances and acquisitions by Ryder to restructure Reader’s Digest’s focus around five categories: home, health, family, finance, and faith.

On of the first orders of business is to create new clubs targeted to Reader’s Digest customers, according to Ryder. “We’re working on some branded clubs within the U.S., some new and some not,” he said. He declined to be more specific. In addition to its flagship magazine, Reader’s Digest also publishes special interest titles such as The Family Handyman and New Choices: Living Even Better After 50 that might provide definition for some of the clubs.

Expanding internationally is also a top priority. “We’re working on marketing outside the U.S.,” said Ryder. “We’ll re-create this business model with BrandDirect as our partner outside the U.S.” That expansion will likely begin initially 1 or 2 countries in Western Europe, he said. Reader’s Digest business is established in 49 countries. “In Germany alone, we have 1,000 employees,” said Ryder. “For BrandDirect to be able to leverage that network is tremendous.”

In addition to its 18 percent stake, Reader’s Digest has an opportunity to buy a larger percentage of BrandDirect in the future as a result of its investment.

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