Book publishers unveil merger deal

Britain’s Pearson and Germany’s Bertelsmann are to merge their publishing units, Penguin and Random House, to recover ground lost to technology groups.

Education and media publisher Pearson said the newly created joint venture, which will bring under one roof fantasy novelist Terry Pratchett, Fifty Shades of Grey author EL James, and 2012 Nobel prize winner Mo Yan, would be named Penguin Random House.

Confirmation of a deal came after months of Pearson board discussions and despite an informal approach from Rupert Murdoch’s News Corp, which was interested in combining Penguin with its Harper Collins publishing unit.

“The consumer publishing industry is going through a period of tumultuous change, propelled by digital technologies and the giant companies that dominate them,” Pearson chief executive Marjorie Scardino said in an email to staff.

“The book publishing industry today is remarkable for being composed of a few large, and a lot of relatively small companies, and there probably isn’t room for them all — they’re going to have to get together.”

Under the plans, Bertelsmann will own 53% of the venture and nominate five directors to the board, while Pearson would own the rest and nominate four. Both must retain their share in the venture for at least three years. Penguin chairman and CEO John Makinson will be chairman, and Random House boss Markus Dohle will be chief executive.

Analysts said they would have preferred a bid from a group such as News Corp, which would have brought cash into the company and enabled Pearson to quit a market that has been hit by the rapid growth of the ebook and the control it has given to major distributors such as Amazon and Apple.

The two groups did not break out the potential synergies but said they would save money on joint warehousing, distribution, printing and central functions.