Penguin, Random House merge to form world’s largest book publisher

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SummaryFighting e-books: The combined Entity will have a global market share of slightly more than 25 per cent

ERIC PFANNER

Two European media companies, Bertelsmann and Pearson, confirmed on Monday that they had agreed to combine their book publishing divisions, Random House and Penguin, creating the largest consumer book publisher in the world.

The deal would give the combined companies, already two of the biggest English-language publishers, an even greater scale to deal with the challenges arising from the growth of e-books and the power of Internet retailers like Amazon.com.

Together, the combined publishers would have a global market share of slightly more than 25 per cent, and a book list that includes contemporary best-sellers like Random House’s Fifty Shades of Grey trilogy and Penguin’s back list of classics from authors like George Orwell.

“That is very attractive in a business that is going to become more and more digital,” said Douglas McCabe, an analyst at Enders Analysis in London. Under the agreement, no cash is changing hands; Bertelsmann, which owns Random House, would control 53 per cent of the combined entity, to be called Penguin Random House, with Pearson owning 47 per cent. Bertelsmann and Pearson said they would share executive oversight, with Markus Dohle of Random House serving as chief executive and John Makinson of Penguin becoming chairman. The combined company, to be based in New York, would have annual revenue of about $3.8 billion.

Thomas Rabe, chief executive of Bertelsmann, said that the merger would allow the combined company to invest more in digital operations and emerging markets, where book sales are growing faster than in developed markets like the US and Western Europe.

Rabe said the merger would allow the publishers to cut costs in their back offices, making it possible to spend more on authors, too.

“The intention is to continue to invest in the creative potential of the businesses,” he said. Rabe added in a conference call that while there were opportunities for “economies of scale,” these cuts would not affect the publishers’ individual imprints, which work directly with the authors. “While we will be combining the strengths of both companies, we will be maintaining the distinctive identities of all our imprints,” he said. Enthusiasm about the agreement has been more muted among literary agents, however, with some responding to reports of a possible deal last week by saying it could reduce the number of outlets for authors.

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