The UK arm of the 87-year-old publisher filed for administration in February, two weeks after the Pensions Regulator rejected a plan to plug the £125m hole in its savings fund.
Better Capital said the £13m investment will fund future growth at the publication, which made an operating loss of £1m on revenue of £85m in the year ending June 2008. The deal will save the firm’s 117 employees, who work in Swindon and Canary Wharf, and also wipe out its debts.
Management at the company will take a 35 per cent stake in the firm as part of the deal.
The deal is Moulton’s second investment since he floated Better Capital last year. In February he also bought aerospace parts business Gardner Group from private equity firm Carlyle for £20m. He says Better Capital will specialise in investing in companies troubled by pension deficits.
Readers Digest launched in the US in 1922. It made its name by taking on tobacco firms with a series of hard-hitting articles on lung cancer.
Its circulation in the UK has gradually fallen from 2m in the 1990s to around 500,000.
Its US parent, Reader’s Digest Association (RDA), has also run into difficulties, due to its $2.3bn (£1.5bn) debt pile, but emerged from bankruptcy in February after cutting the deficit by 75 per cent. RDA said in a statement it had reached a licensing agreement with the new owners, which would ensure a long-term existence in the UK for the brand.