PRH owner Bertelsmann to buy Simon & Schuster in $2.2bn deal

PRH owner Bertelsmann is to buy Simon & Schuster from ViacomCBS for $2.2bn, it has been announced.

Bertelsmann said the acquisition would strengthen its footprint globally, particularly in the US, its second-largest market. Simon & Schuster employs around 1,500 people worldwide and generated revenues of $814m in 2019.

The transaction is subject to regulatory approvals and is expected to close during 2021. Thomas Rabe, chairman and c.e.o. of Bertelsmann, said he was “confident” the acquisition would be approved by the antitrust authorities.

Simon & Schuster will continue to be managed as a separate publishing unit under the Penguin Random House umbrella. Jonathan Karp, president and c.e.o. of Simon & Schuster, and Dennis Eulau, c.o.o. and c.f.o, will continue at the helm.

Rabe said the deal fulfilled strategic objectives by expanding its global content business, strengthening its digital offer alongside building dominance in the US.

He said: “Following the full acquisition of Penguin Random House in April this year, this purchase marks another strategic milestone in strengthening our global content businesses, which includes Penguin Random House, the Fremantle TV production business, and the BMG music division. The book business has been part of Bertelsmann’s identity since the founding of C Bertelsmann Verlag more than 185 years ago and has lost none of its appeal to this day. Bertelsmann continues to be one of the world’s leading creative companies with annual investments in content of around €6bn.

“Bertelsmann will finance the acquisition of Simon & Schuster from existing cash resources. External borrowing is not necessary, thanks partly to the overall positive business development since the summer and the already completed sale of various businesses, investments and real-estate properties.”

Markus Dohle, c.e.o. of Penguin Random House and a member of the Bertelsmann executive board, added: “Simon & Schuster is an extremely well-managed and extraordinarily attractive company with world-renowned authors, 2,000 new publications annually, and a catalog of 35,000 titles. We are very proud to welcome this esteemed company, founded in 1924, to our global publishing community. We share the same passion for books and reading and will work together to give our authors the greatest possible access to readers worldwide. Penguin Random House empowers its 320 publishers around the world with maximum creative and entrepreneurial freedom and will, of course, extend this to our new colleagues at Simon & Schuster.”

The acquisition will further the distance between PRH and the rest of the publisher crowd, both in the US and the UK. In the UK, S&S was the ninth biggest publisher in BookScan sales last year (at circa £27m). In the UK, based on 2019 numbers (when PRH was at £346m), that would take combined BookScan sales to £374m. In the US PRH's revenues are around $3.3bn. 

Trade observers commented immediately on the high price offered by PRH, interpreted as a way of fending off strong interest from HarperCollins and French group Vivendi. One commented that the premium could have been used to convince ViacomCBS to accept the deal even though it has greater risk of running into trouble once US regulators size up the newly combined businesses. The deal is expected to encounter fierce opposition in the US, particularly from agents, but also from rivals and trade customers.

Ian Chapman, UK and international publisher and c.e.o for S&S, said: "The news today comes at the end of a long year for us all and we welcome it with open arms. To become part of the outstanding global company that is Penguin Random House is a truly significant moment for us all. I would like to take the opportunity to thank the staff in the UK, India and Australia for their fortitude and resilience during this uncertain time and our authors and their literary agents who have shown abiding loyalty and trust in us. We look forward to thriving even more vibrantly under new ownership."

In a message to staff, Karp said he was “delighted” with the news after a difficult year that saw the announcement S&S would be sold, the death of president and c.e.o. Carolyn Reidy, lawsuits and the coronavirus crisis.

He said: “We expect the transaction will likely close in the second half of 2021 at the earliest, subject to customary closing conditions, including regulatory approval. I understand that many of you will have questions about how this transition to new ownership will affect your work, and your benefits. I assure you that as this process unfolds we will share information with you , but understand that this will be a long process. Expect no sudden changes beyond the normal decisions we make in our regular course of business. As we head into 2021, our upcoming list of books holds the promise of being every bit as exhilarating a year of publishing as 2020 has been, and I know that we will continue to do our best for our authors and our distribution clients.”

He added: “Successful companies are dynamic and change can be galvanizing. In our 96-year history, Simon & Schuster has had seven owners. From these transformations we have adjusted to new management, welcomed other companies into our fold, and always emerged stronger, with an enduring commitment to excellence in book publishing. When we join Penguin Random House after closing, we can look forward to benefiting from exciting new relationships and opportunities that will enhance our ability to provide authors with the best possible publication they can receive.”