Penguin, Random House to merge in £2.4-bn deal

Oct 30 2012, 01:40 IST
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SummaryPearson will merge its Penguin Books division with Random House, which is owned by German media company Bertelsmann, in an all-share deal that will create the world’s largest publisher of consumer books.

Pearson will merge its Penguin Books division with Random House, which is owned by German media company Bertelsmann, in an all-share deal that will create the world’s largest publisher of consumer books.

The planned joint venture brings together classic and best-selling names. As well as publishing books from authors such as John Grisham, Random House scored a major hit this year with Fifty Shades of Grey. Penguin has a strong backlist, including George Orwell, Jack Kerouac and John Le Carre.

The two companies said on Monday that Bertelsmann would own a controlling 53% share of the joint venture, which will be known as Penguin Random House. Bertelsmann will nominate five directors to the board, while Pearson would own the rest and nominate four. Both must retain their share in the venture for at least three years.

Bertelsmann would keep full control of Verlagsgruppe Random House, its trade publishing business in Germany, and Pearson would retain the right to use the Penguin brand in education.

The announcement appears to put paid to any hopes that Rupert Murdoch’s News Corp may have had in netting Penguin. Reports over the past couple of days have indicated that News Corp has expressed an interest in buying Penguin for £1 billion ($1.6 billion) in cash. News Corp owns HarperCollins, another big publishing house.

Under the terms of the deal, Random House worldwide chief executive Markus Dohle will be the CEO of the new group while Penguin’s CEO John Makinson will be the chairman of its board of directors.

“Together, the two publishers will be able to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers,” said Pearson CEO Marjorie Scardino.

And Bertelsmann’s Dohle said the link-up will “create a publishing home that gives employees, authors, agents, and booksellers access to unprecedented resources”.

The closing of the £2.4-billion merger deal is scheduled to take place in the second half of 2013 following regulatory approval. Pearson said the deal does not require approval by shareholders; Bertelsmann is privately-owned.

Based on recent results, combining the two firms will create a business with annual revenues of about £2.5 billion.

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