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Book-publishing giant Penguin Random House wants to appeal a federal judge’s decision blocking its acquisition of Simon & Schuster, but the first step is to ensure its would-be deal partner stays in the legal fight.
Penguin parent Bertelsmann SE has had talks with Simon & Schuster owner
about offering inducements, including cash, that would lead Paramount to support an appeal and continue pursuing the transaction, according to people familiar with the situation.
Paramount now has a variety of factors to consider, including whether an appeal can be successful. The company could choose to walk away from the deal and put Simon & Schuster back up for sale, but there is no guarantee it would fetch a price as high as the $2.18 billion offered by Penguin Random House.
The companies don’t have much time to come to an agreement. Under the terms of their 2020 deal, Bertelsmann agreed it would pay Paramount a termination fee of $200 million if the acquisition was “completely prohibited or if the termination date is reached,” according to the Bertelsmann 2021 annual report. The termination date is Nov. 21, say people familiar with the deal.
Simon & Schuster’s owner, Paramount Global, has to consider factors such as whether an appeal could succeed or whether to put the publisher back up for sale.
Photo:
Anthony Behar/Sipa/Associated Press
On Oct. 31, U.S. District Judge
Florence Pan
blocked Penguin Random House from acquiring Simon & Schuster on the grounds that the deal would lessen competition. The judge accepted the Justice Department’s argument that the agreement would lead to lower compensation for writers because there would be less competition between publishers of anticipated bestsellers.
Penguin Random House said it would request an expedited appeal. In a quarterly filing on Wednesday, Paramount Global said the company is “discussing next steps with Bertelsmann and Penguin Random House, including seeking an expedited appeal.”
Together, Penguin Random House and Simon & Schuster would have accounted for slightly more than 27% of all print books sold in the U.S. through the 52-week period ended Oct. 24, according to book tracker NPD BookScan. HarperCollins Publishers would be the next largest player, accounting for an 11.1% share.
HarperCollins Chief Executive
Brian Murray
expressed interest in Simon & Schuster during the trial over the Justice Department’s challenge to the deal. HarperCollins parent News Corp, which also owns The Wall Street Journal, is considering a proposal from
Rupert Murdoch
that it merge with
Fox Corp.
, the other wing of the media baron’s empire.
Michael Pietsch,
chief executive of Lagardere SCA’s Hachette Book Group, also said at trial that Hachette Livre, which includes all of Lagardere’s global book-publishing interests, would be a potential buyer.
& Co. has expressed interest in Simon & Schuster and could emerge as a potential buyer, according to people familiar with the situation.
One issue for Paramount and potential bidders to consider is whether the judge’s ruling could make it difficult to pursue any merger between major book publishers. Some people close to the situation said the full details of the judge’s ruling could shed light on that question. A redacted, public version of the judge’s decision is expected in coming days.
The environment for a deal also isn’t as strong as in 2020, with higher interest rates making it more expensive for a buyer to borrow money. A choppy economic outlook could lead to lower offers.
The book marketplace also has hit some bumps. As the Covid pandemic eased, consumers this year began embracing other entertainment options, such as going to movie theaters and theme parks. Print book sales are down 6% this year through Oct. 22 to nearly 589 million units, after growing 11.3% in 2021 and 8.8% in 2020 in the comparable period.
Write to Jessica Toonkel at [email protected] and Jeffrey A. Trachtenberg at [email protected]
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Appeared in the November 3, 2022, print edition as ‘Penguin Seeks Aid Of Simon In Appeal.’
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