In a move that will substantially reduce the DeWitt Wallace--and Lila Wallace--Reader's Digest Funds' control of the publishing company, a recapitalization plan has been devised under which the funds' voting power will be cut from 50% to about 14%. In addition, the two directors' spots held by representatives from the funds will be phased out. The control the funds had over RD has long been a sore point among other shareholders, with some feeling the funds interfered too much with RD's decision-making process.

As part of the new structure, RD will eliminate its Class A (nonvoting) and Class B (voting) shares and create one voting class for all shareholders. RD will buy back 3.6 million Class B shares for $27.50 a share, a 24% premium, while the remaining holders of the Class B shares will receive 1.24 shares of the new common stock.

Holders of the Class B stock appeared to support the deal, bidding up the share price 21%, to $27.73, the day the plan was announced. However, Highfield Capital Management, which holds a large stake of Class A shares, opposed the deal, with Highfield's managing director Richard Grubman asserting that the agreement will hurt the interests of Class A shareholders. Grubman was also against RD's decision to acquire Reiman Publications.