News Corp, parent company to publisher HarperCollins, has acquired romance publisher Harlequin in a deal that will greatly expand both the trade publishers’ international footprint and overall revenues. The deal is expected to close in the third quarter of 2014.
The company was acquired from Canada’s Torstar Corp. for C$455 million ($415 million) and will be run as a division of HarperCollins.
The deal is the biggest in book publishing since Penguin and Random House, the two largest publishers in the world, merged in 2013.
Harlequin had C$398 million in revenues in 2013 and C$56 million in earnings before interest, taxes, depreciation and amortization (EBITDA), a measure of profit. According to a press release from News Corp, Harlequin publishes 110 titles monthly.
Should both HarperCollins and Harlquin repeat similar performance, the large trade book publisher will become nearly a third larger. In its last fiscal year, it had $1.37 billion in revenues and $142 million in EBITDA. Combined with Harlequin, those numbers jump to roughly $1.73 billion in revenue and $193 million in EBITDA.
Harlequin has struggled through the digital transition for book publishers from print to ebooks. Romance readers were among the earliest adopters of digital reading but Harlequin’s fast-growing digital revenues failed to keep up with its shrinking paperback business. The rise of self-publishing has also impacted its business, the company said in its most recent annual report. In 2009, the company had C$493 million in revenues, a number that has decreased every year in the subsequent four years. Despite the decline in revenues, the company’s management predicted a stabilizing year in 2014 for the company in its 2013 annual report.
With the acquisition, News Corp will become stronger in the romance vertical as well as in its foreign language book publishing. Some 40% of Harlequin revenues come from books in languages other than English, according to the News Corp statement. At the same time, 99% of HarperCollins revenue comes from books published in English.
“Harlequin’s business has grown internationally, and will give HarperCollins an immediate foothold in 11 new countries from which we can expand into dozens of foreign langugages for authors who choose to work with us globally,” said HarperCollins president and CEO Brian Murray.
This is the second large, vertical acquisition HarperCollins has made in recent years. In 2012, the company acquired Thomas Nelson, then the largest Christian book publisher in the U.S., and has since combined it with its Zondervan Christian publishing unit, then thought of as the second-largest Christian publisher in the U.S. The division is now known as HarperCollins Christian.
“Acquiring Harlequin after having acquired Thomas Nelson says ‘large vertical plays’ to me,” said Mike Shatzkin, a publishing consultant (and Digital Book World partner) who has been following acquisitions in large publishing companies closely.
According to Shatzkin’s many blog posts on the issue, large publishers may seek to become more “vertical” in the coming years — that is, publish many titles in a particular category like romance or science fiction — to take advantage of the efficiency of marketing many similar books to a specific audience.
Those who follow romance books closely may worry that the acquisition could change the character of the world’s largest romance publisher.
“From a reader’s standpoint, it concerns me because Harlequin has always been innovative and tried to bring diverse story lines,” said Jane Litte, a popular book blogger who follows the romance publishing industry among other. “They’ve moved more nimbly than others in the past and are better connected with readers than most publishers.”