German media giant buys Random House

AFTER signalling for months that it was preparing to bolster its position in book publishing, the Germany-based Bertelsmann group yesterday showed its cards by announcing the purchase of Random House in New York.

Bertelsmann said it was buying Random House and all of its imprints, which include Knopf and Ballantine, which will be folded into its existing publisher, Bantam Doubleday Bell. Bertelsmann bought Doubleday and its Dell imprint in 1986.

It declined to reveal the price, disclosed no financial details of the deal and said the new company would not be listed on the stock exchange.

The new entity will use the Random House name and will be headed by Albert Vitale, the current chairman of Random House. Until four months ago, when he resigned in a blitz of publicity, the president of Random House was Britain's Harold Evans. He was replaced by Ann Godoff.

The transaction could spell a new period of consolidation in the book publishing industry. In the US especially, publishers have suffered recently from declining sales and the increasing squeeze on book-cover prices exerted by the newly-emergent book super-chains, such as Barnes & Noble.

It had been speculated that Bertelsmann had its eyes alternatively either on HarperCollins, the book unit of Rupert Murdoch's News Corp, which was recently at the centre of the Chris Patten affair, or Simon & Schuster, which is owned by Viacom.

Even before yesterday, Bertelsmann was the world's third-largest media conglomerate after Disney and Time Warner. Random House, founded in 1926 and owned by Advance Publications, is America's largest general trade publisher. Its big-name authors include Norman Mailer, Michael Crichton and the Pope.

The deal was being seen as boost to Bertelsmann's BooksOnline venture, which it launched last month in direct competition with the two American online bookselling websites from Amazon.com and Barnes & Noble. Random House will give BooksOnline a fat new inventory of titles.

Headed by the 70-year-old SI Newhouse, Advance is expected to use the sale of Random House to reinforce its major magazine, newspaper and cable television interests. The privately held company is best-known as the owner of Conde Nast magazines, publisher of Vanity Fair and GQ, as well as the New Yorker, which is edited by Mr Evans' wife, Tina Brown.

The fortunes of Conde Nast, headed by Steve Florio, are believed to have improved after a plunge into the red in the early 1990's. Some observers estimate that profits at the group are at about $100m (pounds 61m) on revenues of $900m. While advertising and circulation at the New Yorker have both seen improvements under Ms Brown, the magazine is thought still to be losing money.

"Random House is the most prominent and prestigious publishing house in the world," Mr Newhouse said yesterday. "I am confident that it will grow and prosper under Bertelsmann's future leadership".

Mark Woessner, the chairman of Bertelsmann, said that annual sales of the new publishing unit would be $1.4bn to $1.6bn. "Ever since we bought the US publisher Bantam Books in 1977 it was a strategic goal with the highest priority to strengthen the core book business," he said.

Bertelsmann is the owner of a glitzy new office tower on New York's newly- desirable Times Square, which has a Richard Branson Virgin Megastore as one of its tenants on street level. The company's activities include huge printing operations, book publishing and over 16 million book club members, music recording and publishing, the CLT-Ufa television broadcasting group and an Internet alliance with America Online.

Despite the company's push since the 1980s into television and online media, Mr Woessner has often stressed that the company would never depart from its publishing roots, formed in 1835 when Carl Bertelsmann began publishing Lutheran bibles.