Penguin in play
29.10.12 | Philip Jones
Rupert Murdoch wants to pick up a Penguin. According to reports from two News Corp-owned newspapers, after Pearson admitted to talks with Bertelsmann over a possible spin-off with Random House, Murdoch has stepped in with a chancy £1bn cash bid.
It was inevitable that once Pearson signalled its willingless to listen to offers for Penguin, other bidders woiuld emerge. Penguin would be a prize asset, a complement to many media businesses jealous of its intellectual property, and desirous of its brand name.
In many ways HarperCollins would be a good fit. A combined HarperPenguin would become the biggest trade publisher in the UK, and arguably the biggest in the world. But crucially below the size that would attract the interest of regulators. It would also represent a major coup for Murdoch, and shore up those publishing assets soon to be divested from the wider News Corp business. In fact, for Murdoch, if he is serious about the book publishing bit of his new unit, a bid for one of the smaller groups--Simon & Schuster, Macmillan, or indeed Penguin--looks to be a necessity.
In other times, it's a deal that makes sense. But these are extraordinary moments, and while a merger between Random House and Penguin could be seen as a game-changer, it would be harder to think of PenguinHarper in the same way. If Harper merges with Penguin, in the US the big six would become the big 5: in the UK we'd have a big 3, PenguinCollins, Random, Hachette, and probably in that order. But structurally the industry would still look very much the same - big but not huge publishers dwarfed by the tech giants.
The intriguing thing about the Bertelsmann and Pearson talks is that neither side appears to want to abandon trade publishing for good. If the reports of the discussions are true, both still want to retain a stake in the newly combined business, with Pearson the minority partner. The News Corp bid simply offers Pearson £1bn in cash it does not need, for a business it does not want to discard. At £1bn the price looks cheap too, Pearson is not a stricken seller, if Penguin can only go for one times turnover, then trade publishing really is in a rut. HarperCollins could sweeten the deal by offering its education assets, at which point the conversation between outgoing c.e.o. Marjorie Scardino and the incoming c.e.o. John Fallon suddenly gets very interesting.
Some will point to Murdoch's toxicity, and there will be a few within Penguin, authors and staff, balking at the mere possibility of a deal. And the non-Murdoch press will no doubt stoke this up, as the Guardian already has. This is unfair. Whatever Murdoch's reputation, we are talking about the publisher of twice Booker winner Hilary Mantel, The Bookseller's Publisher of the Year 2011, and the house behind apps such as Wonders of the Universe and CollinsAtlas. With Cheryl Cole, it also has the UK's number one book.
The problem with this deal is not Murdoch, however, it is that it is not enough. It simply doesn't achieve the scale necessary to compete on the global stage with Apple, Amazon, and Google. It would make some difference, but not significantly. It comes ten years too late. For once Murdoch looks outmaneuvered.
Of course with Penguin now in play, other bidders may yet emerge. Perhaps even one beginning with A.