Penguin-Random House Merger Talks: Rumors Confirmed

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Penguin parent company Pearson released a short statement today confirming media rumors that it and Random House Parent Bertelsmann have been in talks over a merger of two of the largest book publishers in the world.

Here is the statement in its entirety:

Statement on media coverage regarding Penguin

October 25, 2012

Pearson notes recent media coverage regarding Penguin, its consumer publishing division, and Random House (part of Bertelsmann). Pearson confirms that it is discussing with Bertelsmann a possible combination of Penguin and Random House. The two companies have not reached agreement and there is no certainty that the discussions will lead to a transaction. A further announcement will be made if and when appropriate.

The merger, if it is agreed upon and passes regulatory muster, would merge two of the largest publishers in the world, creating a company with more size and scale than any other in the business. As of Dec. 31, 2011, Random House had 5,343 employees, according to the company’s website, and Penguin had about 3,500 employees as of Feb. 2012 according to reporting on Digital Book World.

Both Penguin and Random House have dominated best-seller lists lately with hits from E.L. James, Sylvia Day and Gillian Flynn, just to name a few.

Before the Pearson announcement, there had been rumors in the media about a possible merger, including at the Financial Times, which even speculated on the nature of the merger, how ownership would be divided and who would lead the new firm. Publishers Lunch has a roundup of the media coverage.

Publishing industry observers have long speculated that there would be mergers in the coming years between some of the largest publishers. If one publisher merging is a coincidence and two make a trend, then a Random House-Penguin merger would make a trend. Late 2011 saw the acquisition of Thomas Nelson, one of the largest Christian publishers in the U.S. by HarperCollins, which already owned Zondervan, another of the largest Christian publishers in the U.S. Since approval of the deal, HarperCollins has combined those two businesses to form a new Christian division at the company.

In a related trend, digital publishing technology firms have seen an increased amount of financial activity in the past 18 months.

In Aug. 2011, printing and logistics giant R.R. Donnelley acquired digital content publisher and distributor LibreDigital for $19.9 million; this, just a day after acquiring Sequence Personal, a software firm that enables readers to curate and publish content. In Nov. 2011, Manilla-based outsourcing firm SPi Global acquired India-based e-publishing firm Laserwords. Just days later, Rakuten, known as the Amazon of Japan, announced its $315 million acquisition of Canadian e-bookseller Kobo. Aptara, one of the largest e-book conversion houses, with 5,000 employees, was acquired by publicly traded outsourcing firm iEnergizer for $144 million in early Feb. 2012. And in early March 2012, e-book distributor OverDrive acquired the Australian e-bookseller Booki.sh.

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