The German media conglomerate Bertelsmann announced that it hs increased its share in Penguin Random House.
The international media, services and education company is acquiring another 22 percent of shares in Penguin Random House from co-owner Pearson, the British media and education company. This will give Bertelsmann a 75-percent stake in the book group, whose enterprise value has been set at US $3.55 billion for this transaction. The share acquisition is subject to approval by the relevant authorities.
Thomas Rabe, Chairman and CEO of Bertelsmann, said: “Penguin Random House is a success story. We completed the integration in a very short time, and today the group is the clear worldwide number one in book publishing. We are especially pleased about this because the book business has been part of Bertelsmann’s identity for over 180 years. Beyond this, the transaction is an attractive proposition economically, as the earnings attributable to Bertelsmann shareholders will increase by more than 60 million euros.”
Penguin Random House was formed in 2013 when publishing conglomerates Pearson and Bertelsmann agreed to merge their two trade publishing subsidiaries, Random House and Penguin
Bertelsmann had owned RH before the merger, and had always had the majority share in PRH (53%). Pundits have been expecting Pearson to sell its stake in PRH to Bertelsmann (in fact, I thought it had already happened).
The Bookseller reports that the funds will be used to shore up Pearson's declining business:
The agreement will generate proceeds of $1bn to feed back into the Pearson business and strengthen its balance sheet, invest in its digital transformation - and return £300m in surplus capital to shareholders in a share buyback.
The cash injection will help the Pearson business after it reported a massive pre-tax loss for the year of £2.6bn in February, following the challenges it has been facing in the US education market. Sales at the educational publisher fell by 8% to £4,552m in underlying terms for the 2016 year, and adjusted operating profits of £635m were down 21%. Shares in Pearson jumped 3% following news of the sale this morning (11th July).
Pearson's problem is that it is in the same unfortunate position as O'Reilly and other technical publishers: nonfiction books are rapidly becoming redundant to learning in part because the publishers have priced themselves out of their market.
Pearson's only hope is to try to keep its existing business going (for example, it's fighting counterfeit copies by suing its business partners) while trying to transition a massive conglomerate through radical changes.
Good luck with that.
image by ActuaLitté