Penguin and Random House to merge
By Hannah Jordan Monday, 29 October 2012
Pearson and German media group Bertelsmann have agreed a deal to merge their respective publishing businesses, Penguin and Random House.
The new partnership, to be called Penguin Random House, will see Bertelsmann own 53% of the business while Pearson will take a 47% stake.
It is anticipated that the deal will be completed in the second half of 2013, before which the publishers will continue to operate independently.
Chairman and chief executive of Random House Worldwide Marcus Dohle will become CEO of the new group while chairman and CEO of Penguin, John Makinson will become chairman of the board of directors. Five appointments to the board of directors will be made by Bertelsmann at a later date, with a further four from Pearson.
The German publishing group said that the agreement signalled a move towards implementing the "digital transformation" outlined last month by its CEO Thomas Rabe, as well as a planned expansion into target growth markets of Brazil, India and China.
In September Rabe detailed four priorities – strengthening core business, digital transformation, growth platforms and regional growth - that he said would form the basis of a new five to 10 year strategy for Bertelsmann. However, notable by its absence was any mention of print in the company’s future plans.
In January this year Bertelsmann sparked rumours that it intended to end its printing operations after it announced plans to spin off its gravure and international print businesses, including Prinovis, into a separate €1.2bn (£1bn) print division based with the groups’ global BPO business, Arvato.
Following the move, which was implemented in the first half of 2012, Arvato recorded slightly lower H1 revenues of €573m compared to €573m in H1 of 2011 although operating EBIT for the period jumped to €20m, up €6m from H1 in 2011.
According to a report in German newspaper Handelsblatt, Bertelsmann plans to add additional services to its print business to make it a more attractive sale target.
Meanwhile, commenting on the merger of Random House and Penguin, Pearson chief executive of Marjorie Scardino, who is set to leave the company at the end of 2012, said: "Penguin is a highly respected and much loved part of Pearson. This combination with Random House will greatly enhance its fortunes and its opportunities."
Penguin has undergone a series of changes in recent years in order to keep pace with developments in the digital and self publishing markets. But in what the publisher called a "tougher than expected" year, Penguin recorded a year-on-year profits crash of 48% to £22m in H1 of 2012, compared to £42m last year, while sales declined by 4% to £441m.
Scardino added: "Together the two publishers will be able to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers."
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