Publishing House Merger Creates ‘Penguin Random House’

Media companies Pearson and Bertelsmann have agreed on a merger to combine their two publishing houses, Penguin and Random House

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The logo of the Penguin publishing house, part of Pearson Plc, is seen on a reference book at a bookstore in London, U.K.

Pearson, the education company that owns both Penguin and the Financial Times, and Bertelsmann which owns Random House, confirmed on Monday that both publishing houses will merge to create “the world’s leading consumer publishing organization”.

A press release for Penguin publishing announced that “under the terms of the agreement, Penguin and Random House will combine their businesses in a newly-created joint venture named Penguin Random House.” Random House is currently the biggest publishing house in the UK while Penguin is at number three. With the newly merged venture, Bertelsmann will own 53% as the majority shareholder while Pearson will own 47%. The partnership will exclude Bertelsmann’s publishing business in Germany and Pearson will hold the rights to the Penguin brand in education markets across the globe.

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The agreement combines the publisher’s activities in the U.S., the UK, Canada, Australia, New Zealand, India and South Africa, as well as Penguin operations in China and Random House’s Spanish language units in Spain and Latin America, writes the Financial Times.

The merger comes in response to the rapidly changing publishing industry and growing competition from online companies such as Apple and Amazon. Both organizations agree that the best way for them to sustain their commercial and publishing success is by creating a partnership and form a stronger platform to work from. “The media landscape has changed a great deal with the arrival of Apple, Amazon and Google,” explained book industry commentator Alistair Burtenshaw to the BBC. “Publishers need to be able to leverage their content across the widest range of platforms.”

Penguin Random House will bring together two of the world’s “big six” publishers to create a new powerhouse that will control about a quarter of U.S. and UK e-book sales, reports the Guardian. However, the combination of these two large publishing houses working together could come under scrutiny by fellow competitors.

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The agreement also follows the announcement by Marjorie Scardino to stand down as chief executive of Pearson after 15 years. Her decision sparked fears that the company would sell Penguin or the Financial Times newspaper, but Scardino has vowed that this would only happen “over my dead body,” notes the Guardian. Scardino, who took over as chief in 1997, was the first female CEO of a major U.K. company. Under the merger, John Makinson, Penguin’s chairman and chief executive, will become chairman; Markus Dohle, the head of Random House, will take the post of chief executive, writes the Financial Times.

The talks between Bertelsmann and Pearson began late last week and accelerated over the weekend, with reports that both companies hoped to close the deal by the second half of 2013, notes the New York Times. There have also been reports that Rupert Murdoch’s News Corp, which owns Harper Collins, approahced Penguin regarding a possible merger, writes the Guardian. However, Penguin’s chief executive, John Makinson, has confirmed that the deal with Bertelsmann will go ahead as planned.