Dusseldorf In the book industry, a deal worth billions has finally collapsed: the Bertelsmann subsidiary Penguin Random House will not take over the New York publisher Simon & Schuster. “Bertelsmann will drive the growth of its global book publishing business without the previously planned merger of Penguin Random House and Simon & Schuster,” the media group announced on Monday evening.
Bertelsmann then announced that it wanted to appeal the verdict in an urgent procedure because, from the group’s point of view, it was based on an incorrect definition of the market. The Gütersloh-based family company has now announced: “Bertelsmann will no longer pursue the original plan after talks with Simon & Schuster shareholder Paramount Global.”
Two years ago, the Bertelsmann subsidiary announced the takeover of the US publisher. The world’s number one in the book business wanted to take over number four. The acquisition was supposed to be completed by 2021, but the US Department of Justice filed a lawsuit against the merger in November 2021. The Simon & Schuster publishing house publishes the works of well-known authors and personalities such as Hillary Clinton and Stephen King.
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Penguin Random House had until Monday (local time) to persuade Simon & Schuster to appeal the US federal court’s ruling. The Reuters news agency reported, citing people familiar with the matter, that this was not possible within the specified period. For Simon & Schuster owner Paramount, it’s not worth it to continue arguing with the US Department of Justice, US media write.
Bertelsmann has to pay a fee of 200 million dollars
Because the deal has now failed after two years, Bertelsmann has to pay a fee of 200 million dollars (195.4 million euros) to Paramount, as contractually agreed. In addition, the group is left with high court costs.
With the purchase of Simon & Schuster, Bertelsmann originally wanted to strengthen its presence in its second largest market, the USA. At the time, Bertelsmann CEO Thomas Rabe described the takeover as a “strategic milestone in strengthening our global content business.”
Rabe now wants to grow between five and ten percent annually in this area even without the acquisition – “organically, but also through acquisitions,” the Bertelsmann boss is quoted as saying in the current corporate announcement.
Penguin Random House achieved record sales of four billion euros in 2021 and is Bertelsmann’s third-largest division after RTL Group and service provider Arvato. The publisher employs 10,000 people worldwide and sells more than 700 million books annually. Recent bestsellers have been books by former US President Barack Obama (“A Promised Land”) and his wife Michelle (“Becoming”).
As part of its “Boost” future strategy, Bertelsmann intends to invest five to seven billion euros in its businesses by 2026. “Penguin Random House will also have significant investment funds available,” says Rabe.
Third setback for Rabe, a fourth threatens
For the 57-year-old top manager Rabe, it is the third defeat in his merger plans in just a few weeks. At Europe’s second largest media group, Rabe is pursuing the strategy of founding “national media champions” at the local level in order to counter global competition such as Netflix or Disney.
In France, the Bertelsmann holding M6 wanted to merge with the TV station TF1 of the French conglomerate Bouygues. After the antitrust authorities expressed concerns that the duo controlled more than 70 percent of commercial television, Bertelsmann withdrew its plans. Plan B, to sell the M6 elsewhere, also failed because a new deal should have been made by January, but the schedule for this was too tight.
>> Read also: Big plans, even bigger problems: How the big merger projects of Bertelsmann boss Rabe fail
Rabe’s takeover fantasies also failed in the call center industry. Contrary to what was planned, the subsidiary Majorel did not meet its competitor, Sitel, which is twice as large and belongs to the French billionaire family Mulliez. They fell out over rising interest rates. The companies had already agreed on the basics of the takeover in the summer.
The fourth defeat is now threatening in the Netherlands. The antitrust authorities decide on the planned merger of RTL Nederland with John de Mol’s Talpa Network. Conditions are already emerging. The TV broadcaster expects a decision “for the fourth quarter of 2022”.
Should this fourth deal also fail, planned transactions with a total value of five billion euros at the Gütersloh-based family company could disappear into thin air. The pressure on CEO Rabe would then increase. Supervisory Board Chairman Christoph Mohn recently backed the manager: “We think long-term: If plans are delayed by two or three years, that’s not a problem,” Mohn told the Handelsblatt.
The failure of the recent deal in America opens the door for new buyers of Simon & Schuster. News Corp’s HarperCollins publishing group and French Lagardère group competitor Hachette Book Group have already publicly announced their interest in buying Simon & Schuster. Harper Collins had already tried unsuccessfully for Simon & Schuster in 2020.
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