Reader's Digest UK, the staple of doctors’ waiting rooms, is facing administration less than three years after being rescued by private equity veteran Jon Moulton.
The company, founded in 1922, has seen the sales of books and CDs collapse since 2010, leading to a dramatic decline in its main catalogue business.
Better Capital, Mr Moulton’s listed private equity firm, is proposing creditors vote for a company voluntary arrangement (CVA) in order to stave off administration. The deal would see 95 of 125 staff lose their jobs. The CVA needs to be voted on by creditors, including printers and publishers. However, a CVA would allow Better Capital to rescue the 225,000-circulation magazine business, which has been more successful.
Nick Sanders, head of portfolio at Better Capital, said: “In the last two to three years the catalogue business has really moved against us because people just don’t buy hard copy books or CDs anymore. Given the traditional market for books has decreased so rapidly, the business has just become unsustainable. We have tried everything but it is not enough. We do believe that the magazine business can be profitable.”
Mr Sanders said that since Better Capital bought Reader’s Digest for £14m, the firm had invested £23m into the company. In 2010, Better Capital bought the UK division out of administration after its US parent refused to support the £120m pension fund liability.