Penguin Random House merger cleared in Europe

The merger between Penguin and Random House has been approved by the EU.

The European Commission announced today (5th April) that the transaction would not raise competition concerns because “the merged entity will continue to face several strong competitors”.

Regarding its English-language book sales, the commission said: “the merged entity will furthermore face a concentrated retail base, such as supermarkets for print books and large online retailers for e-books, like Amazon. In addition, the Commission's investigation revealed no evidence that the transaction would lead to risks of coordination among publishers in relation to the acquisition of authors' rights and the sale of English language books to dealers.”

The commission also analysed Random House and Penguin’s third-party book distribution businesses, and found: “the parties have low market shares and that many alternative suppliers for book production and third party book distribution services remain active in the EEA.”

As a result, the Commission concluded that the transaction would not significantly impede effective competition in the EEA.

A spokesman for Pearson said: "Pearson and Bertelsmann believe that the combined organisation, the world's leading consumer publishing company, will have a stronger platform and greater resources to invest in rich content, new digital publishing models and high-growth emerging markets."

Today's decision means the creation of the new consumer publishing organisation, Penguin Random House, is on track for completion no later than the third quarter of 2013.

The EU decision follows clearances given for the new venture by competition regulators in the US and New Zealand, with China and Canada still examining the merger.

Bertelsmann said it, along with Penguin's current parent Pearson, welcomed the EU Commission's decision: "It marks another important stage on the way to completing their proposed transaction." It added that the two remained confident that the outstanding approvals would be forthcoming during the course of the year.

Random House-parent company Bertelsmann will own 53% of the company, with Penguin parent Pearson owning the remaining 47%. Bertelsmann will have five directors on the Penguin Random House board and Pearson four.

Random House chief executive Markus Dohle will be chief executive for Penguin Random House, with Penguin chairman and chief executive John Makinson to be chairman.

Pearson will retain the rights to use the Penguin brand in education markets, and the deal also excludes Bertelsmann's trade publishing business in Germany.

For its financial results for 2012, Random House reported record group revenues of €2.1bn, with operating profit of €325m. Meanwhile, the Penguin Group's 2012 financial results saw revenues of £1.05bn, with operating profits of £98m.