Pearson and Bertelsmann have confirmed that Penguin and Random House are to combine into a new consumer publishing organisation, Penguin Random House, with the merger expected to complete in the second half of 2013.
Bertelsmann will own 53% of the new venture and Pearson 47%; Bertelsmann gets five directors on the new board and Pearson four. Current Penguin chairman and chief executive John Makinson will be chairman of Penguin Random House with Random House chief executive Markus Dohle in the chief executive role for the new company.
However the joint venture will exclude Bertelsmann's trade publishing business in Germany and Pearson will retain rights to use the Penguin brand in education markets worldwide.
A Pearson spokesman said the company would not be releasing more details as yet about the structuring of the combined company, or any further personnel announcements at this stage. He said: "Obviously there will be an internal process and details will come out during that process. We are committed to making it as open and transparent as possible as it unfolds with staff, customers and the general public."
In a statement, the publishers said: "The combination brings together two of the world's leading English language publishers, with highly complementary skills and strengths. Random House is the leading English language publisher in the US and the UK, while Penguin is the world's most famous publishing brand and has a strong presence in fast-growing developing markets. Both companies have a long history of publishing excellence, and both have been pioneers in the dramatic industry transformation towards digital publishing and bookselling . . .
"In reviewing the long-term trends and considerable change affecting the consumer publishing industry, Pearson and Bertelsmann both concluded that the publishing and commercial success of Penguin and Random House can best be sustained and enhanced through a partnership with another major international publishing house."
The combined organisation will have a stronger platform and greater resources to invest in rich content, new digital publishing models and high-growth emerging markets, the statement said.
Pearson chief executive Marjorie Scardino said: "Penguin is a successful, highly-respected and much-loved part of Pearson. This combination with Random House—a company with an almost perfect match of Penguin's culture, standards and commitment to publishing excellence—will greatly enhance its fortunes and its opportunities. 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."
Thomas Rabe, chairman and c.e.o. of Bertelsmann, said: "With this planned combination, Bertelsmann and Pearson create the best course for new growth for our world-renowned trade-book publishers, to enable them to publish even more effectively across traditional and emerging formats and distribution channels. It will build on our publishing tradition, offering an extraordinary diversity of publishing opportunities for authors, agents, booksellers, and readers, together with unequalled support and resources."
The merger will now be subject to regulatory and other approvals, including merger control clearances. Under the terms of the agreement neither Pearson nor Bertelsmann may sell any part of their shareholding in Penguin Random House for three years.
In 2011, Random House reported revenues of €1.7bn (£1.48bn) and operating profit of €185m (£161m). Penguin reported revenues of £1.0bn and operating profit of £111m with total assets of £1.0bn.