Picture: 123RF/Sergii Kolesnikov
Picture: 123RF/Sergii Kolesnikov

Berlin — German media group Bertelsmann said on Wednesday it would purchase publisher Simon & Schuster for $2.175bn in cash from ViacomCBS, strengthening its presence in the US, its second-largest market.

Bertelsmann outbid Rupert Murdoch’s News Corp in a contest for the publisher of Dan Brown, Hillary Clinton and Stephen King that Viacom put up for sale in 2020, to refocus on its online and advertising operations.

The deal represents the second major move in CEO Thomas Rabe’s drive to consolidate Bertelsmann as the world’s biggest bookseller, after the 185-year-old publisher took full control of Penguin Random House less than a year ago.

“This acquisition will create enormous added value for our company,” Rabe said of Simon & Schuster deal.

“We are building our position as one of the leading creative content companies in the US ... I'm convinced that this a good day both for book publishing and for authors.”

The deal to acquire Simon & Schuster, which reported revenue of $814m in 2019, is profitable and employs 1,500 staff, is expected to close during 2021 subject to antitrust approval.

Rabe told reporters the merged entity would have a US market share of below 20%, making the deal clearly “approvable”, noting that the 2013 merger of its own Random House with Penguin had met no objections from US regulators.

Talking books

Jonathan Karp and Dennis Eulau will stay on to run Simon & Schuster under the umbrella of the far larger Penguin Random House. Combining printing, sales and distribution would deliver significant synergies, Rabe said.

Size is important in publishing as best-seller lists become increasingly dominated by a handful of blockbusters — such as Penguin Random House's edition of former US President Barack Obama's memoir “A Promised Land”.

But overall US book sales have been growing by a mere 1% a year, according to the American Association of Publishers, as readers are distracted by social media and other online formats.

Rabe described books as the “past, present and future” of Bertelsmann but also highlighted the US publishing deal's significance for its digital content as people turn to e-books or listen to narrated 'talking' books.

Cashing in

Founded in 1835 as a publisher of theological texts, Bertelsmann is a private conglomerate spanning magazine, educational and music publishing and controls European TV group RTL.

Rabe is restructuring to reduce its exposure to declining areas such as printing, has merged its Arvato CRM customer services unit, and made a string of smaller technology bets.

The lack of its own public equity to serve as an acquisition “currency” has constrained Bertelsmann's ability to chase big deals, even as tech giants led by Facebook and Alphabet's Google suck up more ad dollars.

Yet Rabe was able to pay cash after building a war chest in 2020 of €4.3bn in liquid funds.

Rabe pulled this off by retrenching during the coronavirus crisis, as well as by selling other investments and property.

And while Bertelsmann's focus is mainly on organic growth, it has the capacity to do further deals, he added.

Reuters

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