Nearly two centuries after it published its first book, German media giant Bertelsmann solidified its control over the world’s largest book publisher in a deal that values Penguin Random House at $3.55 billion (€3.1 billion).
Bertelsmann acquired a further 22-percent stake from minority shareholder Pearson, raising its shareholding to 75 percent and leaving the British company 25 percent. The transaction comes four years after the merger of Pearson’s Penguin and Bertelsmann’s Random House created the publishing behemoth, which has some 250 imprints worldwide.
The deal values the new stake at $780 million, though Pearson said in London that the “tax-efficient transaction” will generate $968 million in net proceeds for the British company, bolstered by a further $66 million in dividend payments next April.
Book publishing represents the core identity of the company ... dating back to its 1835 founding by Carl Bertelsmann.
The transaction marks a new step in Bertelsmann’s growth from a small publisher of religious books to a diversified media giant with global reach. The company, based in Gütersloh in Westphalia, booked a record operating profit of €2.6 billion last year. It said the new acquisition would be financed from available liquidity.
The increased shareholding brings the publishing group in line with other operations of Bertelsmann, which prefers either complete ownership or 75-percent control and patiently increases its stakes to reach these levels. The company built up a 100-percent shareholding in German magazine publisher Gruner + Jahr, for instance, and 75 percent in the RTL television network.
“We have reached our goal with the majority of 75 percent,” Bertlesmann chief executive Thomas Rabe said on Tuesday. Book publishing represents the core identity of the company, he said, dating back to its 1835 founding by Carl Bertelsmann.
He added that Pearson’s decision to keep a stake in the publisher was a sign of its value and success. The British company has shed most of its publishing interests, including the Financial Times and the Economist, to focus on its education products.
Penguin Random House is home to bestselling authors like John Grisham and Dan Brown and recently acquired the rights to the forthcoming memoirs from former US President Barack Obama and Michelle Obama. In Germany, the company’s imprints include leading publishers Goldmann and Heyne as well as C. Bertelsmann.
“This is a good day for Penguin Random House,” said Markus Dohle, who has headed the New York-based publishing group since the 2013 merger and remains in charge. “This is and remains one of the best jobs in the media world, in a marvelous company with great colleagues and matchless authors.”
With both Grisham and Brown coming out with new novels this fall, Penguin Random House is counting on a good year. The share of profit flowing to Bertelsmann shareholders will increase by more than €60 million as a result of the transaction, Rabe said.
Catrin Bialek leads a team of reporters covering the IT and media industries. To contact the author: firstname.lastname@example.org