TEXT-S&P says Bertelsmann AG ratings unaffected by Penguin merger
Nov 2 - Standard & Poor's Ratings Services announced on Nov. 1, 2012 that its ratings on German publishing group Bertelsmann (BBB+/Stable/A-2) would not be affected by the announcement that it will merge its publishing group Random House (RH) with Pearson's Penguin. The tie-up would create a world leading consumer publishing company with an estimated 25% global market share and generate meaningful synergies. Moreover, the new entity--Penguin Random House (PGH)--would be better positioned to face structural challenges caused by the rise of e-books. We understand that the merger would not result in any meaningful cash outflow for Bertelsmann and that Bertelsmann will control and consolidate PGH, thereby positively affecting adjusted debt to EBITDA by 0.1x to 0.2x, all other things being equal. A loss of direct access to RH cash, which we would view negatively, could be partly offset by a clear dividend policy that would pay out close to 100% of net profits.
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