Media responds to potential RH-Penguin merger

News that Bertelsmann and Pearson are in talks to combine Random House and Penguin has attracted widespread media coverage today (26th October).

The Financial Times, which is owned by Pearson, has cited sources familiar with the situation as saying discussions centre around a merger in which Bertelsmann would own a 50% stake in any tie-up. However, the newspaper also sites the same sources as warning several issues were unresolved and talks could still fall apart.

Yesterday Pearson, which owns Penguin, released a statement saying: “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 BBC (26th October) has reported that Pearson’s shares rose 1.5% in early trading upon news the company was in talks to merge with Random, the UK’s second largest publisher.

Collectively, Penguin and Random House would take up around a quarter of the UK market for physical books, and many newspapers have speculated any merger was likely to respond in scrutiny from the competition authorities. The Bookseller reported yesterday (25th October) that the combined the duo would have taken 27.1% of all physical sales through Nielsen's Total Consumer Market, with sales of £241m, to 8th September.

The Guardian and The Independent reported analyst Lorna Tilbian from Numis as saying any merger would probably reduce the likelihood of Pearson selling off the Financial Times because if Bertlesmann obtained a majority stake in any merger then Pearson would have money to invest in its education business.

Earlier this month it was announced that current Pearson c.e.o Majorie Scardino would stand down to be replaced by head of international education John Fallon.

Tilbian said: “Consolidation is the order of the day, and technology and tablet computers have given it extra momentum. They [publishers] have got to gang together to have enough clout to take on the technology giants that have transformed the industry.” She added: "I can see a world where Apple, Amazon and Google become the 21st century equivalent of Time Warner, News Corp and Walt Disney, but they won't [just] be running the technology and content, but also distribution."