BY Richard Summerfield
Paramount Global, the owner of Simon & Schuster, has abandoned its plan to sell the unit to Bertelsmann, the German media group which owns Penguin Random House.
The deal, initially announced in November 2020, had been called into question by the 31 October ruling of Judge Florence Pan of the US District Court for the District of Columbia, which noted that the US Department of Justice (DOJ) had shown that the deal could substantially lessen competition “in the market for the U.S. publishing rights to anticipated top-selling books”.
Initially, Bertelsmann announced its intention to appeal the decision, however that appeal has now been scrapped, a move welcomed by the DOJ. Jonathan Kanter, assistant attorney general, said the department “is pleased that Penguin Random House and Simon & Schuster have opted not to appeal”. As a result of the deal’s collapse, Penguin Random House will have to pay a $200m termination fee to Paramount.
Paramount intended to divest itself of Simon & Schuster as it was a non-core asset, and use the funds raised from the deal to pay down debt. However, the proposed sale attracted scrutiny from the Biden administration, which sued to block it in November 2021 on the grounds it would lead to less competition for blockbuster books and lower advances for authors who earn $250,000 or more. “Penguin Random House and Simon & Schuster are frequently invited by agents to bid in auctions for the rights to these books, and they are often the final two bidders. Competition between Penguin Random House and Simon & Schuster has resulted in higher advances, better services, and more favorable contract terms for authors,” the DOJ said.
“The book business has been part of Bertelsmann’s identity for 187 years, and this will not change: Penguin Random House is part of the Global Content Strategy, one of our five strategic priorities,” said Thomas Rabe, chairman and chief executive of Bertelsmann. “Bertelsmann plans to achieve annual growth of five to ten percent in this area – organically, but also through acquisitions. In total, Bertelsmann will invest between five and seven billion euros in the growth of its businesses in the years ahead as part of its Boost Plan. Significant investment funds will be available to Penguin Random House as well.”
The future of Simon & Schuster remains uncertain. In a statement, Paramount Global noted that: “Simon & Schuster remains a non-core asset to Paramount, as was determined in early 2020 when Paramount conducted a strategic review of its assets. Simon & Schuster is a highly valuable business with a recent record of strong performance; however, it is not video-based and therefore does not fit strategically within Paramount’s broader portfolio.”
News: Penguin Random House scraps $2.2 bln deal to merge with Simon & Schuster