Week 48/20 – week ending 27 November

Elena Ferrante joins Bookshop.org influencers

In a coup for Bookshop.org, reclusive Italian novelist Elena Ferrante (My Brilliant Friend, The Lying Life of Adults) has produced for the site in the UK and US a list of her top 40 books by women. She has released the list with her publisher, Europa Editions, which will donate its 10 per cent affiliate commission for sales through its Bookshop.org page to the pool that the site passes on to independent bookshops.

Authors on Ferrante’s list include Toni Morrison, Zadie Smith, Elizabeth Strout, Margaret Atwood, Alice Munro, and Chimamanda Ngozi Adichie.

Other authors with reading lists on Bookshop.org in the UK include Malorie Blackman, Max Porter, Nikesh Shukla, Eimear McBride, Emma Gannon and Melissa Harrison.

Bertelsmann buys Simon & Schuster

Bertelsmann, owner of Penguin Random House, has been confirmed as the buyer of Simon & Schuster, paying $2.175bn. S&S had been put up for sale by its owner ViacomCBS earlier this year.

The announcement of the acquisition stated that S&S would remain a separate business under the PRH umbrella. In the US, president & CEO Jonathan Karp and COO & CFO Dennis Eulau will remain in place. The announcement implies that the parties do not expect regulatory obstructions, and aim to complete the transaction this year.

Thomas Rabe, chairman & CEO of Bertelsmann, said: “Following the full acquisition of Penguin Random House in April this year, this purchase marks another strategic milestone in strengthening our global content businesses, which include Penguin Random House, the Fremantle TV production business, and the BMG music division. The book business has been part of Bertelsmann’s identity since the founding of C. Bertelsmann Verlag more than 185 years ago and has lost none of its appeal to this day. Bertelsmann continues to be one of the world’s leading creative companies with annual investments in content of around €6 billion.

“Bertelsmann will finance the acquisition of Simon & Schuster from existing cash resources. External borrowing is not necessary, thanks partly to the overall positive business development since the summer and the already completed sale of various businesses, investments and real-estate properties.”

Markus Dohle, CEO Penguin Random House and a member of the Bertelsmann Executive Board, added: “Simon & Schuster is an extremely well-managed and extraordinarily attractive company with world-renowned authors, 2,000 new publications annually, and a catalog of 35,000 titles. We are very proud to welcome this esteemed company, founded in 1924, to our global publishing community. We share the same passion for books and reading and will work together to give our authors the greatest possible access to readers worldwide. Penguin Random House empowers its 320 publishers around the world with maximum creative and entrepreneurial freedom and will, of course, extend this to our new colleagues at Simon & Schuster.”

Cash deal sees Bertelsmann buy Simon & Schuster for $2.175bn

Bertelsmann, owner of Penguin Random House, has bought Simon & Schuster, paying $2.175bn (£1.63bn) in cash ‘from existing liquid funds’.

S&S had been put up for sale by its owner, ViacomCBS, at the start of the year. HarperCollins was reported to be in the running last week by the New York Times, with an offer of over $1.7bn. French media conglomerate Vivendi made up the third player in the race.

The Bertelsmann announcement said that S&S would remain a separate business. The key phrase was: ‘Simon & Schuster will continue to be managed as a separate publishing unit under the Penguin Random House umbrella.’ In the US, president & ceo Jonathan Karp and coo & cfo Dennis Eulau will remain in place.

In London, the deal was welcomed by Ian Chapman, S&S’s ceo & publisher, UK & International. He said: “The news today comes at the end of a long year for us all and we welcome it with open arms. To become part of the outstanding global company that is Penguin Random House is a truly significant moment for us all. I would like to take the opportunity to thank the staff in the UK, India and Australia for their fortitude and resilience during this uncertain time and our authors and their literary agents who have shown abiding loyalty and trust in us. We look forward to thriving even more vibrantly under new ownership.”

Given PRH’s track record of running divisions such as Transworld at arm’s length, there seems little prospect of S&S decamping from its offices in the Gray’s Inn Road any time soon. Furthermore, there may be little appetite for further disruption inside PRH, which has spent years reorganising its office space following the Penguin/Random House merger.

The deal would see the largest and the third-largest publishers in the US combine, with revenues touching $3bn, but the merger is unlikely to be blocked by regulators. In terms of the entire US book market, if self-publishing is included, PRH’s market share is reportedly estimated by Markus Dohle, CEO Penguin Random House, at about 15%, and S&S’s at 3.5%. Combined, the companies will have revenues of about $3bn, with S&S contributing about £875m. The aim is to complete the transaction this year.

In the UK, the deal is also unlikely to trouble the competition authorities, partly because S&S is smaller here than in the US, and PRH/S&S combined would have TCM sales of £374m, about 22% of the market – 25% is the market share threshold that triggers formal enquiries. With £27.5m TCM sales in 2019, S&S was the ninth biggest publisher, although overall sales figures are likely to be considerably higher. PRH recorded 2019 sales of £346m, well ahead of Hachette, at number 2 with £203m.

Annoucing the deal, Thomas Rabe, chairman & ceo of Bertelsmann, said: “Following the full acquisition of Penguin Random House in April this year, this purchase marks another strategic milestone in strengthening our global content businesses, which include Penguin Random House, the Fremantle TV production business, and the BMG music division. The book business has been part of Bertelsmann’s identity since the founding of C. Bertelsmann Verlag more than 185 years ago and has lost none of its appeal to this day. Bertelsmann continues to be one of the world’s leading creative companies with annual investments in content of around €6 billion.

“Bertelsmann will finance the acquisition of Simon & Schuster from existing cash resources. External borrowing is not necessary, thanks partly to the overall positive business development since the summer and the already completed sale of various businesses, investments and real-estate properties.”

Dohle added: “Simon & Schuster is an extremely well-managed and extraordinarily attractive company with world-renowned authors, 2,000 new publications annually, and a catalog of 35,000 titles. We are very proud to welcome this esteemed company, founded in 1924, to our global publishing community. We share the same passion for books and reading and will work together to give our authors the greatest possible access to readers worldwide. Penguin Random House empowers its 320 publishers around the world with maximum creative and entrepreneurial freedom and will, of course, extend this to our new colleagues at Simon & Schuster.”

In financial terms the Bertelsmann/S&S deal will be the largest in the US since HarperCollins bought Harlequin six years ago. For 2019 S&S reported revenue of $814 million and income of $143 million. 2020, despite the pandemic, is proving an even better year for S&S, with sales up over the first nine months – indeed up 28.5% over the third quarter to 30 September – and a year-end turnover of ballpark $875m is predicted. Thus the purchase price would represent almost exactly 2.5 times sales revenues, well ahead of standard US publishing valuations of 1-1.5x sales. Part of that premium is accounted for by the fact that the the sale of S&S represents a rare occasion in which a big five US publisher has been in play.

In an upbeat note to staff in New York, Karp said: “In March, when ViacomCBS announced its plan to sell Simon & Schuster, we did not know that shortly thereafter we would also be weathering a deadly pandemic, displacement from our offices, disruption in the bookselling marketplace, and the sudden death of our longtime and revered CEO [Carolyn Reidy, who died of a heart attack in May]. Through it all, we have persevered, adapted and innovated, maintained a keen focus on our authors and our books, and produced some of our best results in recent years.

“Now, eight months later, I am delighted to announce that Simon & Schuster will be joining together with Penguin Random House for the next chapter in our storied publishing history… From our first meeting with Markus Dohle and his team, it was clear that he wants to bring Simon & Schuster into the Bertelsmann family with the same thoughtful respect for our creative independence that accompanied the merger of Penguin and Random House – an integration that took years and was handled with exceptional professionalism.

“Successful companies are dynamic and change can be galvanizing. In our 96-year history, Simon & Schuster has had seven owners. From these transformations we have adjusted to new management, welcomed other companies into our fold, and always emerged stronger, with an enduring commitment to excellence in book publishing. When we join Penguin Random House, we can look forward to benefitting from exciting new relationships and opportunities that will enhance our ability to provide authors with the best possible publication they can receive.”

Simon & Schuster employs about 1,500 people worldwide, with authors in the US including Hillary Clinton, John Irving, Stephen King, and Bob Woodward. PRH, with more than 320 imprints, employs approximately 10,000 people, and publishes about 15,000 new books a year.

The deal represents the culmination of a long march by Bertelsmann to the apex of American publishing, which began with its purchase of Bantam Books in 1977. Subsequent deals saw the purchase of Doubleday in 1986 and Random House in 1998. Penguin Group was bought from Pearson in 2013, with Bertelsmann originally taking a 53% stake, increasing it to 75% in 2017 and 100% this year.

The S&S deal means that PRH now becomes the second largest division inside Bertelsmann behind broadcaster RTL Group. Bertelsmann also includes magazine publisher Gruner + Jahr, music company BMG, service provider Arvato, Bertelsmann Printing Group, the Bertelsmann Education Group and Bertelsmann Investments, an international network of funds. Wordlwide, the company has 126,000 employees and generated revenues of €18.0 billion in the 2019 financial year.

Bertelsmann’s interest in S&S had been flagged up for some months. In September Thomas Rabe told the FT that the acquisition would be consistent with Bertelsmann’s strategy: “We’ve been the most active player on the consolidation of the book publishing market in the last 10 years. We combined Penguin and Random House very successfully to create by far the largest book publisher in the world, actually the only global book publisher. Given this position we would, of course, be interested in Simon & Schuster.”

S&S UK publishes authors including Santa Montefiore, Rupi Kaur, Graham Swift, Philippa Gregory and Benjamin Zephaniah. Within the UK division, there are three imprints: Simon & Schuster; Scribner and fast-growing Simon & Schuster Children’s Books, ‘which publish a wide and eclectic mix of authors ranging across commercial fiction, literary fiction, general non-fiction and children’s publications.’ It also runs a sales and distribution service for a number of independent and international publishers including Andrews McMeel, Black Library, Boom! Studios, Elliott & Thompson, Gallup Press, Inner Traditions, National Geographic Adult Books, Rebellion and VIZ Media.