GENEVA, SWITZERLAND – Two of the English-language publishing world’s largest companies, Bertelsmann and Pearson, known for their publishing houses Random House and Penguin, said Monday 29 October that they will merge the two publishers. The announcement of the new joint venture, to be called Penguin Random House, confirmed news leaked to the Financial Times at the end of last week.
The companies say the merger will be a boon to all concerned. The new company will have worldwide revenue of about $4 billion, reports industry newspaper Publisher’s Weekly. Thomas Rabe, chief executive officer at German media company Bertelsmann, said in a statement, “The combination of Random House and Penguin, first of all, significantly strengthens book publishing, one of our core businesses. Second, it advances the digital transformation on an even greater scale, and third, it increases our presence in the target growth markets Brazil, India and China.”
Pearson’s CEO Marjorie Scardino, chief executive of Pearson, said in her statement that the deal, to be concluded in 2013, will let the companies “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.”
Some in the publishing world have reservations, given that the new company will control 26 percent of the world publishing market, according to news agency AP. And Forbes, looking at five of the business side pros and cons, says it points to greater consolidation in the publishing world, not necessarily a good thing for authors and agents.
Publisher’s Weekly details the deal: “Although the two parties have signed the deal, final approval will need the approval of government regulators. Under the terms of the agreement, neither Pearson nor Bertelsmann can sell any part of their stake in Penguin Random House for three years. To protect Pearson’s interests as a minority shareholder, if Bertelsmann declines a Pearson offer to sell its entire shareholding, Pearson may require a recapitalization by which Penguin Random House raises debt of up to 3.5x EBITDA, with a dividend distributed to shareholders in line with their ownership. In addition, from five years after completion, either partner may require an IPO of Penguin Random House.”
