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Random House and Penguin in "merger" talks
25.10.12 | Joshua Farrington
Pearson has confirmed that it is in talks with Bertelsmann regarding a potential merger between Penguin and Random House. It would be the first major structural shift in the global trade publishing industry since 2006 when French media firm Lagardère acquired Time Warner Book Group, creating Hachette.
In a statement, the UK-listed group said: "Pearson confirms that it is discussing with Bertelsmann a possible combination of Penguin and Random House. 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."
The news follows speculation that the Pearson would seek to dispose of Penguin and focus on its education division, with head of international education John Fallon becoming c.e.o. In the new year when Marjorie Scardino steps down.
Many analysts have predicted possible consolidation among the leading trade publishers, thanks to the changing industry and a greater focus on digital and interaction with large players such as Apple and Google.
Collectively, Penguin and Random House would take up around a quarter of the UK market for physical books, a figure which may spark scrutiny from competition authorities. Random has recently overtaken Hachette in the UK thanks to the sucess of Fifty Shades, with Nielsen BookScan reporting that it took a 16.2% market share in the period to 8th September, compared with Penguin's 10.9% share. Combined the duo would have taken 27.1% of all physical sales through Nielsen's Total Consumer Market, with sales of £241m.
According to the FT, which reported the news earlier today, discussions have focused on a merger in which Bertelsmann would have a stake of more than 50%. If the merger talks are successful, both Markus Dohle, chief executive of Random House, and John Makinson, chief executive of Penguin, are expected to take senior leadership roles.
The reaction on Twitter was one of shock, with strong opinions on the suitability of such a move. Rebecca Smart, c.e.o. of the Osprey Group, said: "this deal makes the best sense of any - RH has cash, Penguin has brand". However, literary agent Diana Banks said: "Penguin and Random House in deal talks. A worrying indicator of the state of the industry". Walrus Ebooks commented: "Random House and Penguin about to merge? Haha, as is we hadn't enough monopolies in the world..."
Many began suggesting names for the entity that could emerge from a union, including the "sinister" House of Penguin, and "groovy" Random House Penguin. Random House began trending as one the most discussed terms on the entire site.