Pearson has completed the sale of a 22% stake in Penguin Random House (PRH) to its co-shareholder Bertelsmann.
Bertelsmann will now own a 75% stake in the business, while Pearson will own the remaining 25%.
The education giant agreed to sell the 22% stake on 11th July 2017, at which time Markus Dohle, c.e.o. of PRH, said the deal signalled "great continuity and stability" for Penguin Random House.
While the completion of the share increase strengthens Bertelsmann’s governance rights at Penguin Random House, the independence of PRH's 250 individual publishers remains unaffected by the share increase, according to Bertelsmann.
The agreement generates proceeds of $1bn for Pearson that it said it planned to feed back into the business to strengthen its balance sheet, invest in its digital transformation, and return £300m in surplus capital to shareholders in a share buyback. Penguin Random House’s enterprise value was set at $3.55bn for the purposes of the share increase.
Bertelsmann c.e.o. Thomas Rabe, who on 1st January 2018 becomes chairman of the Penguin Random House board of directors, said the deal marked "a strategic milestone" for Bertelsmann.
Rabe commented: "Bertelsmann has the widest range of creative products of any company worldwide – and the book business has served as a core part of our identity for more than 180 years. Accordingly, today marks a strategic milestone for us in several respects. First, the three-quarters majority in Penguin Random House will increase the profit share of Bertelsmann's shareholders by more than 60 million euros. Second, we now have the ideal prerequisites for developing Penguin Random House – already number one in the book world – with a view to the long term and in continuity. And third, we now own strategic majorities in all of Bertelsmann's corporate divisions: 75 percent of RTL Group and Penguin Random House; 100 percent of all other divisions.”
Dohle added: “Today is a good day for Penguin Random House. The assured commitment of our two founding shareholders guarantees stability and allows us to continue to concentrate fully on the creative work of our authors. We will continue to publish the very best books and stories for our readers. Both shareholders are fully supportive of this goal."