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Penguin Random House scraps $2.2 bln deal to merge with Simon & Schuster

Penguin Random House, the world’s largest book publisher, and rival Simon & Schuster have scrapped a $2.2 billion deal to merge, Penguin owner Bertelsmann said in a statement.

November 22, 2022
22 November 2022

WASHINGTON, Nov 21 (Reuters) – Penguin Random House, the
world’s largest book publisher, and rival Simon & Schuster have
scrapped a $2.2 billion deal to merge, Penguin owner Bertelsmann
said in a statement.

Bertelsmann, a German media group which owns Penguin,
initially said it would appeal a U.S. judge’s decision that said
its purchase of Simon & Schuster would be illegal because it
would hit authors’ pay.

But Bertelsmann said in a statement on Monday that it “will
advance the growth of its global book publishing business
without the previously planned merger of Penguin Random House
and Simon & Schuster.”

Reuters reported on Sunday that the German company was
unable to convince Paramount Global, Simon & Schuster’s
owner, to extend their deal agreement and appeal the judge’s
decision.

Judge Florence Pan of the U.S. District Court for the
District of Columbia ruled on Oct. 31 that the Justice
Department had shown the deal could substantially lessen
competition “in the market for the U.S. publishing rights to
anticipated top-selling books.”

With the deal’s dissolution, Penguin will pay a $200 million
termination fee to Paramount.

Paramount said on Monday that Simon & Schuster was a
“non-core asset” to Paramount. “It is not video-based and
therefore does not fit strategically within Paramount’s broader
portfolio,” the company said in a filing on the deal’s
termination.

The Justice Department did not immediately respond to a
request for comment.

Unlike most merger fights, which focus on what consumers
pay, the Biden administration argued the deal should be stopped
because it would lead to less competition for blockbuster books
and lower advances for authors who earn $250,000 or more.

Penguin writers include cookbook author Ina Garten and
novelists Zadie Smith and Danielle Steele, while Simon &
Schuster publishes Stephen King, Jennifer Weiner and Hillary
Rodham Clinton, among others.

The U.S. Justice Department filed a lawsuit aimed at
stopping the deal in November 2021.

In hearings held in August, the government argued that the
largest five publishers control 90% of the market, and a
combined Penguin and Simon & Schuster would control nearly half
of the market for publishing rights to blockbuster books, while
its nearest competitors would be less than half its size.

The top five publishers are Penguin Random House,
HarperCollins, Macmillan, Simon & Schuster and Hachette, with
Walt Disney Co and Amazon.com Inc also in the
market. HarperCollins is owned by News Corp.
(Reporting by Diane Bartz and Klaus Lauer; Editing by Tomasz
Janowski and Rosalba O’Brien)

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