Shares of Reader's Digest Assn. (RDA) have not been on the Street's best-seller list for some time. After hitting 38 in February, they went south, falling to 29 in mid-May--then turned around and climbed back to 36 5/8 on June 7. Part of the reason is a perception among analysts that the turnaround organized by CEO Thomas Ryder, who took the helm in 1998, is running a year ahead of schedule.

But here is the plum: Whispers are that German conglomerate Bertelsmann is in informal talks to acquire Reader's Digest, a publisher and direct marketer of magazines, books, videos, records, and CD-ROMs. "The price being discussed is $5.8 billion to $6.3 billion, or 55 to 60 a share for Reader's Digest," says one investment manager. She sees the talks succeeding, because of the big prize in assets Bertelsmann would acquire. Bertelsmann has interests in 600 companies in 53 countries. Through U.S. publisher Random House and its other units, Bertelsmann sells 1 million books daily and counts 170 million magazine and newspaper readers.

One of the valuable assets that Reader's Digest would bestow on privately held Bertelsmann: a Big Board listing. Its stock could later be used by Bertelsmann as currency to buy more U.S. assets to widen its media reach, particularly on the Internet. Reader's Digest has heavy Net presence through its 28 Web sites, which are helping propel its fast turnaround, analysts say. Dan Veru of Palisades Capital Management, which owns more than 1 million shares, says on fundamentals alone, the stock is worth 46, or 11 times estimated 2001 EBITDA of $430 million. He expects Reader's Digest to earn $1.55 a share in 2000 and $2 in 2001. Bertelsmann spokeswoman Liz Young declined comment. A Readers Digest spokeswoman said they don't comment on speculation.

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