The future of Reader’s Digest UK was secured today as management bought the firm out of administration and promised “significant plans” to expand the business.
The 72-year-old British edition of the magazine, which employs 100 people, was snapped up for £13 million in a deal backed by private equity firm Better Capital.
Reader’s Digest UK will continue to be published under its well-known name after its buyers agreed a licence arrangement with its US parent firm, Reader’s Digest Association (RDA).
Managing director Chris Spratling, who will remain at the company to lead its management team, said he was “delighted” to have rescued the business from administration.
“The iconic magazine and prize draw will continue but it should be remembered that these are just a part of a much larger business,” he said.
“There are tremendous opportunities for our businesses in financial services, books and healthcare and significant plans to expand all aspects of the Reader’s Digest business in the UK.”
He said the buyout has left the company fully funded and debt free.
The UK title has maintained its publishing schedule throughout the administration.
Administrator Phillip Sykes, of Moore Stephens, said: “It’s been a stressful time for everyone employed in the business so I’m delighted with the outcome.”
The title called in administrators on 17 February when its embattled US parent RDA said it was no longer able to support it following a crisis in its pension fund, which had a £125 million deficit.
The magazine has seen circulation tumble in recent years from more than two million at one point to around 465,000.
Spratling, who has been the UK business’s boss since 2008, said the firm would continue to target its core over-50s reader base as it expands its marketing offering of products like vitamins, wine and financial services.
The firm already sells products like music compilations – including recent Michael Jackson and classical offerings – while existing financial services include insurance for older age groups.
Spratling said the new internet site, which will relaunch in six to eight weeks, will have a “huge amount” of content including recipes, gardening, travel and health.
It is also hoped the site will help attract customers to buy its products.
“We believe the best way to sell many of the other products and services we provide, whether it be music, books or financial services, is to provide a compelling proposition and reason for a customer to visit a website,” he said.
“Ultimately you do that by providing compelling content.”
He said the magazine itself, to which management do not intend to make fundamental changes, accounts for less than 8 per cent of group profits.
The firm’s US parent hit hard times after embarking on a highly leveraged $2.8 billion (£1.9 billion) buyout deal which was backed by private equity.
RDA filed for bankruptcy protection last August after battling financial difficulties as it laboured under vast interest payments on a $2.2 billion debt (£1.4 billion).
Putting the UK title into administration allowed the wider group to plough on with its financial restructuring and RDA has since emerged from Chapter 11 protection.
Its other titles across the world – including some 50 editions of the pocket-sized magazine – were not affected by the UK administration.