Publishers Random House and Penguin in merger talks

 

Two of the world's largest book publishers are in talks to create a new market leader designed to wrestle back leadership of the industry from the technology interlopers Apple and Amazon.

Random House and Penguin, which is owned by the Financial Times (FT) publisher Pearson, are weighing up a merger in response to the rise in popularity of ebooks.

A deal would combine the companies who are respectively behind Nigella Lawson's latest Italian cooking adventure and Pippa Middleton's party-planning guide.

German-owned Random House has also experienced huge success this year with the Fifty Shades of Grey trilogy, which has shifted 30 million copies at the last count.

A tie-up is expected to leave the privately held media group Bertelsmann with a majority share in the new venture, which would control a quarter of the market in Britain and America and dominate the best-seller lists.

It also raises questions over the future direction of Pearson, whose long-serving boss, Dame Marjorie Scardino, steps down at the end of the year. She remoulded the business into an education giant, but stood firm behind the FT, leaving analysts to speculate the newspaper would be sold, not Penguin, when John Fallon succeeds her.

However, a deal would be scrutinised by competition authorities. In Britain, Random House is the second-largest book publisher, followed by Penguin. The market leader is French-owned Hachette. Fourth comes Rupert Murdoch's HarperCollins, which is due to be spun off from News Corporation together with the mogul's newspaper assets.

"Pearson confirms that it is discussing with Bertelsmann a possible combination of Penguin and Random House," a company statement said. "The two companies have not reached agreement and there is no certainty that the discussions will lead to a transaction. A further announcement will be made if and when appropriate."

Digital advances are redrawing the media world. Universal Music recently won approval to swallow up EMI, home of Katy Perry and Coldplay, although it will be forced to make disposals.

The publishing industry has followed music from the high street into cyberspace. Apple and several leading publishers were sued by the US Department of Justice this year for alleged collusion. Most parties agreed to settle.

Bertelsmann has grown practised at splicing its assets together with others. It put its record label, BMG, into a joint venture with Sony. After selling out completely, it set up another music venture with private-equity group KKR.

It has also dealt with Pearson before. The pair amalgamated their TV businesses to create what is now RTL, Bertelsmann's biggest division.

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