Bertelsmann Will Soon Own 75% of Penguin Random House

Bertelsmann Will Soon Own 75% of Penguin Random House Uncategorized

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

About Nate Hoffelder (10894 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

2 Comments on Bertelsmann Will Soon Own 75% of Penguin Random House

  1. Yup, they gouged readers/schools while they could, that house of cards is on it’s way down. 😉

  2. Well, Bertelsmann got big running a book-club in Germany. They do have massive data on what used to work in publishing, and I’m sure they’ll use it to steer PRH publications.

    Which means that PRH will keep publishing the same old same old. Maybe this is good news for all selfpublishers. We get to serve all those underserved niches, and those might just get bigger in the future.

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