LONDON Oct 29 Britain's Pearson has
agreed to merge its Penguin book division with Bertelsmann's
Random House to create the world's leading consumer publisher,
in an apparent snub to Rupert Murdoch's News Corp.
Confirmation comes a day after Murdoch's Sunday Times
reported that News Corp could make a direct bid for
Penguin Books, an option that analysts appeared to prefer.
Jefferies released a note earlier on Monday saying they
would favour the idea of a News Corp bid because it would bring
cash into the company and enable Pearson to exit a challenged
Instead, the education and media publisher Pearson said the
newly-created joint venture would be named Penguin Random House,
with Bertelsmann owning 53 percent and Pearson the rest.
Bertelsmann will nominate five directors to the Board of Penguin
Random House and Pearson will nominate four.
Neither Pearson nor Bertelsmann may sell any part of their
shareholding in the joint venture for three years. Analysts have
noted regulatory hurdles could be an issue for the tie-up but
with a joint market share expected to be around 25 percent in
the United States and Britain the deal could go through.
The groups said the planned joint venture would help both
sides adapt to the rapidly changing book market, which has been
transformed by rapid growth in ebooks, and increased price
competition from supermarkets.
"Together, the two publishers will be able to share a large
part of their costs, to invest more for their author and reader
constituencies and to be more adventurous in trying new models
in this exciting, fast-moving world of digital books and digital
readers," Pearson Chief Executive Marjorie Scardino said.
Pearson has increasingly focussed on its education business
in recent years and analysts believe the group could also sell
off its FT Group in time.
Bertelsmann, Europe's biggest media group and owner of
European TV broadcaster RTL Group, is in the middle of
an overhaul in an attempt to catch up with rapid changing
Pearson also published a trading update, showing sales up 5
percent in the first nine months while operating profit was down
by 5 percent, reflecting the sale of assets, acquisition costs
and weakness in the British professional training market.
It reiterated its outlook of growth in sales and profits at
constant exchange rates for the full-year.