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Reader's Digest Sells CompassLearning in Bankruptcy

According to Reader’s Digest Association Inc., the sale of its CompassLearning unity has received the approval of a bankruptcy judge and the publisher has reached an agreement with a pension group on claims that it may have forced the closing of its U.K. business.

Marlin Equity II LP won CompassLearning, which creates interactive teaching materials for schools and libraries, beating out four other bidders in an auction that took place on January 7. Marlin, which is run by El Segundo, California-based private equity firm Marlin Equity Partners, has agreed to pay $31.8 million, an increase from its initial offer of approximately $20.3 million in November.

According to Reader’s Digest spokesman William Adler, on January 12, the sale was approved by U.S. Bankruptcy Court Judge Robert Drain in White Plains, New York. Drain is scheduled to hold a January 15 hearing to consider confirming the Chappaqua, New York-based publisher’s reorganization plan to emerge from bankruptcy.

Under Reader’s Digest’s reorganization plan, the publisher’s $2.2. billion debt would be reduced by 75 percent to $550 million.

Reader’s Digest filed for Chapter 11 bankruptcy protection in August, citing a decrease in advertising spending and a high debt load incurred in its 2007 acquisition by Ripplewood Holdings LLC for $1.6 billion.

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