Reader's Digest's UK arm was given a new lease of life yesterday after it was bought out of administration by private equity firm Better Capital, a company backed by British venture capitalist Jon Moulton, for £13 million.

Reader's Digest Association (RDA), publisher of the Reader's Digest magazine, had put its 72-year-old UK edition, (RDA UK), under administration in February 2010 after the UK Pensions Regulator refused to approve a massive deficit in its UK pension fund. (See: Reader's Digest UK arm under administration)

RDA UK employed 135 people and had 1,600 members on its pension fund, and had accumulated a pension deficit of £125 million.

Moore Stephens, an accounting firm association, handling the administration of Readers Digest UK, had received nearly 100 offers initially, which were later narrowed down to less than 10 last month.

AIM-listed Better Capital bought Reader's Digest UK in a debt free £13-million management buy-out deal. It will take on 100 of the existing employees and said that it would invest further to bring the magazine back to it's heydays.

RDA UK's managing director Chris Spratling, managers and other employees will take a 35-per cent stake in the company and Spratling will continue to run the business.

Better Capital will not take on the magazine's £125-million pension fund deficit and leave the liability with the Pension Protection Fund.

Better Capital has also successfully negotiated a licence agreement with the US parent of RDA UK for using the Reader's Digest brand.

Reader's Digest  was first published in the UK in 1938 and had a peak readership of about two million in the 1990s. Its circulation had since seen a dramatic fall to about 465,000 in recent years despite trying to launch an online edition.

The Pleasantville, New York-based RDA itself emerged from bankruptcy protection in February after a debt restructuring.

The company had filed for file for pre-arranged bankruptcy protection in August 2009 after it reached agreement on a debt-for-equity restructuring with a majority of its secured lenders. (See: Update: Reader's Digest to file for bankruptcy protection)

RDA's problems came after an investor group led by private equity group, Ripplewood along with J Rothschild Group, GoldenTree Asset Management, GSO Capital Partners, Merrill Lynch Capital Corporation and Magnetar Capital took it private in a $2.6 billion buyout deal in 2007.
The deal left the 88 year-old company with a debt of $2.2 billion.

RDA, co-founded in 1922 by Lila Bell Wallace and DeWitt Wallace, had launched Reader's Digest in 1922 in the US and started publishing in the UK in 1938.

RDA is the world's largest-circulation magazine, and has 94 magazines, including 50 editions of Reader's Digest, operates 65 branded website and sells approximately 40 million books, music and video products across the world.

The iconic monthly magazine is the world's largest-circulation magazine with a worldwide circulation of 21 million copies and over 100 million readers across 50 editions.