SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): Auugst 30, 1999
THE READER'S DIGEST ASSOCIATION, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10434 13-1726769
(State or other juris- (Commission File (I.R.S. Employer
diction of incorporation Number) Identification No.)
or organization)
Pleasantville, New York 10570-7000
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:
(914) 238-1000
ITEM 5. Other Events.
Filed herewith as Exhibit 99.1 is a copy of the
company's news release, issued today, outlining the acquisition
of Books Are Fun, Ltd.
ITEM 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial statements of business acquired
Not applicable
(b) Pro forma financial information
Not applicable
(c) Exhibits
Number Description
99.1 Press Release of The Reader's Digest
Association, Inc. dated August 30, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
THE READER'S DIGEST ASSOCIATION, INC.
(Registrant)
Date: August 30, 1999
/s/GEORGE S. SCIMONE
George S. Scimone
Senior Vice President and Chief
Financial Officer
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release of The Reader's Digest
Association, Inc. dated August 30, 1999
Exhibit 99.1
Contact: Stephen J. Morello, Public Relations and Corp.Communications,
914-244-7717
READER'S DIGEST TO ACQUIRE `BOOKS ARE FUN'
Privately Held Firm is Nation's Leading Display Marketer of
Books and Gifts
ACQUISITION WILL DIVERSIFY READER'S DIGEST'S
DISTRIBUTION CHANNELS, CREATING SYNERGIES WITH CURRENT
BUSINESSES AND GEOGRAPHIC EXPANSION OPPORTUNITIES
PLEASANTVILLE, N.Y. August 30, 1999 - The Reader's Digest
Association, Inc. (NYSE: RDA, RDB) today announced it has
reached an agreement to acquire privately held Books Are
Fun, Ltd., the nation's leading display marketer of books
and gifts, for approximately $380 million. The acquisition
is part of Reader's Digest's strategy to diversify
distribution channels for its current product lines, while
also using its brand strength to create new opportunities.
The announcement was made by Thomas O. Ryder, chairman and
CEO of Reader's Digest.
Books Are Fun markets on-site in schools and businesses in
all 50 states and across Canada by offering premium-quality
books and gifts at discount prices. The company expects to
sell some 20 million books and gift items in 1999 with
revenues in excess of $220 million. It has had compound
growth rates of 24% for revenues and 27% for operating cash
flow since 1996. Principal owners of the eight-year old
company are founder Earl Kaplan and Equity Group Investments
(EGI), an investment firm controlled by Sam Zell.
Ryder said: "Books Are Fun offers an excellent fit with our
growth strategies, particularly to diversify distribution
channels for our products beyond direct mail. As the
leading player in the rapidly growing display-marketing
segment, Books Are Fun already has very strong growth
prospects that will contribute to our revenues and earnings.
Further, there are excellent opportunities to significantly
accelerate growth through synergies with our school-based
marketing program and by moving the business into our
international markets."
In announcing its growth strategies earlier this year,
Reader's Digest highlighted a plan to expand distribution
channels for existing product lines to lessen its dependence
on direct mail sales. Developing new channels will give
Reader's Digest the opportunity to further leverage the
sales potential of its books, music, videos and magazines,
which have broad consumer appeal around the world.
The transaction is expected to contribute significantly in
the near term to Reader's Digest's revenue and operating
cash flow. The acquisition is expected to have a slightly
positive effect on Reader's Digest's earnings per share in
fiscal year 2000. It will be financed through a combination
of cash on hand and bank debt. The deal, which is
subject to customary closing conditions including regulatory
approval, is expected to close around October 1, 1999.
Books Are Fun displays and sells books and gifts items at
schools and businesses using book fairs and similar
displays. It has a sales force of more than 700 independent
representatives. The representatives serve 60,000 schools,
12,000 large corporations and institutions, 9,000 day-care
centers and 20,000 small businesses. Books Are Fun has been
responsible for donating over three million books to
elementary and secondary schools since its inception in
1991. Books Are Fun's book categories include best-selling
novels, cookbooks, children's books, educational, sports,
hobby, nature, travel and self-help titles. Non-book
categories include music, videos, and gift items.
Ryder added: "Books Are Fun has a proven high-margin
business model that has delivered outstanding results over
the past eight years. They have had an unbroken string of
double-digit growth years. Importantly, their model is
flexible, allowing the company to continue its growth trend
by adding new products and distribution points. Like
Reader's Digest, Books Are Fun emphasizes high-quality
products and does thorough market testing prior to
distribution."
Earl Kaplan, president and CEO of Books Are Fun, said: "We
are extremely pleased to be joining the Reader's Digest
family, which offers tremendous growth opportunities for our
business. The people at Reader's Digest really understand
our business, and, of course, the company is an American
institution that has one of the most trusted brands in the
world."
Synergistic growth opportunities identified by Reader's
Digest for the acquisition include: expansion of the
successful Books Are Fun business model outside the U.S. and
Canada (Reader's Digest's global infrastructure can help
Books Are Fun expand its reach); expansion of sales of
existing Reader's Digest products, including books, music,
videos and magazines, through Books Are Fun; use of Reader's
Digest's vast editorial and music content archives to
create new products for the Books Are Fun distribution
channel; and cost reduction through combined purchasing and
manufacturing.
Reader's Digest said it plans to retain the current Books
Are Fun senior management team and to maintain Books Are Fun
headquarters in Fairfield, Iowa.
The Reader's Digest Association, Inc. is a global publisher
and direct marketer of products that inform, enrich,
entertain, and inspire people of all ages and all cultures
around the world. Worldwide revenues were $2.5 billion for
the fiscal year ended June 30, 1999. Global headquarters
are located at Pleasantville, New York.
This news release includes "forward-looking statements"
within the meaning of the U.S. federal securities laws.
Forward-looking statements include any statements that
address future results or occurrences. These forward-
looking statements inherently involve risks and
uncertainties that could cause actual future results and
occurrences to differ materially from the forward-looking
statements. Some of these risks and uncertainties include
factors relating to the ability to integrate the acquired
company's business successfully, the continued strength of
the acquired company's relationships with its employees,
suppliers and customers, and the accuracy of the basis for
forecasts relating to the acquired company's business.
Reader's Digest Association's filings with the Securities
and Exchange Commission, including its reports on Forms 10-
K, 10-Q and 8-K, contain a discussion of some additional
factors that could affect future results and occurrences.
