Reader's Digest falls to private equity bidders

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Reader's Digest, the magazine read by 80 million people around the world, is changing hands in a deal worth $2.4bn (£1.3bn).

The publisher, Reader's Digest Association, has agreed a takeover by a consortium of private equity bidders, after struggling for years with declining circulation and mounting losses.

The new owners are led by Ripplewood, a New York-based buy-out fund set up a decade ago, whose other acquisitions have included an Egyptian bank, an American car dealer and a Japanese resort.

"We are very excited to reach this agreement," said Tim Collins, Ripplewood's founder and chief executive. "Reader's Digest is a truly wonderful company with a broad array of global assets and growth businesses that are extending a rich heritage."

As well as its flagship magazine, the company publishes a range of other titles, markets CDs and puts on book fairs. The buy-out values the company's shares at $1.6bn, and the consortium will also take on debts of about $800,000.

Activist shareholders, who have been agitating for a move that would boost the flagging share price, welcomed the deal, pitched at an 8 per cent premium to the company's share price on Wednesday.

The first edition of Reader's Digest was published in 1922 by DeWitt and Lila Wallace from their apartment in Greenwich Village in New York City, with 5,000 copies mailed out at 25 cents apiece. Its wholesome family tone and relentlessly upbeat outlook quickly caught on, and by 1938, the first international edition was being published in the UK.

Today the magazine publishes 50 editions in 21 languages and is still expanding. This year it launched three new editions, in Slovenia, Croatia and Romania. It has been battling against a stuffy image and an ageing readership which has turned off advertisers, and been criticised for being slow to embrace the internet.

Ripplewood's other publishing and direct marketing investments include Direct Holdings Worldwide, a marketer of entertainment products under the Time Life brand, and WRC Media, a publisher of educational materials including Weekly Reader and the World Almanac.