RDG Capital makes offer for Rosetta Stone

Rosetta Stone Inc may return to private equity ownership.

The Arlington, Va.-based language learning company confirmed on May 29 that its board received an expression of interest from RDG Capital Fund Management. Rosetta’s board is “carefully evaluating” the offer, according to a company statement. Rosetta is also implementing a strategic plan, the statement said.

Mergermarket has reported that a group of PE investors, which includes RDG, have offered to buy Rosetta for $9 to $10 a share. That comes to $222.6 million. One of the bidders is a middle-market private equity firm that has invested heavily in education and media, Mergermarket said.

The RDG proposal is an expression of interest and not a formal bid or an offer, a source cautioned. It was not clear if Rosetta has engaged advisors. Executives for the company declined comment beyond the press release.

If the RDG group is successful, Rosetta Stone could return to PE ownership. Norwest Equity Partners and ABS Capital Partners acquired the company in 2006. Both ABS and Norwest have since exited the company.

Rosetta went public in 2009 at $18 a share and ended its first day of trading at $25.12. Its stock price has fallen sharply since that time. It closed at $7.96 per share on June 6.

Founded in 1992, Rosetta Stone provides software to help users learn new languages. It currently offers courses in 30 languages. Rosetta is delving into education technology with its acquisitions of Lexia Learning, which provides a reading program to improve student proficiency, and Vivity Labs, which offers games to boost brain function.

In May, the company reported that its first quarter revenue fell 4 percent to $58.4 million, while net losses narrowed by about 2 percent to $19.8 million. In March, Stephen Swad, Rosetta president, CEO and director, resigned and was succeeded by A. John Hass, a former Goldman Sachs managing partner.

RDG, a New York investment firm, couldn’t be reached for comment. RDG is the fund of Russell Glass, an activist investor who is reportedly a former lieutenant of Carl Icahn.