Paramount pulls offer to sell Simon & Schuster to Penguin Random House
Paramount has rescinded its offer to sell Simon & Schuster to Penguin Random House, three weeks after a federal judge blocked publishing giant PRH's attempt to acquire its smaller rival.
The consolidation of the two publishing houses would have reduced competition in that industry to only four major firms instead of the current "Big Five." The planned merger gave rise to antitrust concerns inside the Biden administration's Justice Department.
The decision to terminate the sale agreement was announced Monday by Jonathan Karp, president and chief executive of S&S.
"[T]here will be no appeal of Judge Florence Pan’s decision to block the merger of the two companies," he wrote in an email to employees that was obtained by The Times.
"This news is still fresh, and at this point I have no specific information to impart about what will happen in the coming months," Karp continued. "You may read or hear rumors and speculation about our future, but you can be assured that I will keep you informed as soon as there is pertinent news I can share."
He added that S&S has "never been more profitable and valuable than it is today" and possesses what is currently the bestselling backlist in the publishing industry.
Paramount — previously ViacomCBS — also owns CBS, Showtime, BET, Comedy Central, MTV, Paramount Pictures, the Paramount+ streaming service and a number of other brands. It had hoped to complete the merger a year ago before hitting regulatory headwinds. The scuttled sale is a setback for Paramount, which has been trying to raise money by shedding some assets.
Paramount noted in a Securities and Exchange Commission filing Monday that "Penguin Random House is obligated to pay a $200 million termination fee," per the terms of the initial sale agreement, which included that provision in case the deal was blocked.
When it put Simon & Schuster up for sale shortly after Viacom and CBS merged, Paramount received several offers, including from HarperCollins, another Big Five publishing firm. The conglomerate accepted a $2.18-billion offer from Penguin Random House, owned by German conglomerate Bertelsmann, in November 2020.
In early 2021, the Authors Guild, the National Writers Union, four other writers’ groups and the nonprofit Open Markets Institute sent a letter urging the Department of Justice to block the deal, stating that the merger "would bring well more than half of key U.S. book markets under the control of a single corporation, which poses a variety of potential threats to freedom of speech and democracy in the United States."
Longtime Simon & Schuster author Stephen King, who had been publicly critical of the deal, was among the witnesses for the government at the federal trial in August. He recalled that back when he started writing books in the 1970s, there were hundreds of imprints, unlike today.
“Consolidation is bad for competition,” King said during the trial. “That’s my understanding of the book business. The more companies there are, the better it is.”
On Monday, suitor Penguin Random House accepted the reality of the situation.
"Penguin Random House remains convinced that it is the best home for Simon & Schuster’s employees and authors, and together with Bertelsmann, we did everything possible to complete the acquisition," a spokesperson said in a statement Monday.
"We believe the judge’s ruling is wrong and planned to appeal the decision, confident we could make a compelling and persuasive argument to reverse the lower court ruling on appeal. However, we have to accept Paramount’s decision not to move forward."
Simon & Schuster's future under the Paramount umbrella remains uncertain.
"Simon & Schuster remains a non-core asset to Paramount, as was determined in early 2020 when Paramount conducted a strategic review of its assets," Monday's SEC filing said. "Simon & Schuster is a highly valuable business with a recent record of strong performance; however, it is not video-based and therefore does not fit strategically within Paramount’s broader portfolio."
Times staff writer Meg James contributed to this report.
This story originally appeared in Los Angeles Times.
