Leading publishers Random House and Britain's
Pearson group confirmed Friday that they are in merger talks that
could create the world's biggest media concern.
Pearson, which has owned the Penguin book publishers since 1970,
said it was in talks with Bertelsmann, the German media giant which
owns international publisher Random House.
Pearson also owns the Financial Times (FT) newspaper in Britain.
The deal was estimated to be worth 2.4 billion pounds (3.8 billion
dollars), according to British media reports.
"The two companies have not reached agreement and there is no
certainty that the discussions will lead to a transaction," Pearson
said in comment to reports about the merger talks.
A spokesman for Bertelsmann said he had nothing to add to the
statement.
If the talks are successful, however, they would create the
world's biggest book publisher, according to the Guardian newspaper.
The move would bolster both companies in the face of a changing
market, driven by the rise of the e-book from the likes of Amazon,
Apple and Google, analysts said.
Heavy discounting on books by online retailers and supermarkets
added to the woes of the publishing industry.
The merger talks come less than a month after Pearson chief
executive Marjorie Scardino said she would step down as chief
executive after 15 years at the helm.
Pearson's share price rose by 2 per cent on the London stock
market Friday.
Penguin, which blazed a trail in the 1930s by producing high
quality, inexpensive paperbacks, has struggled to adapt to the rapid
changes in the industry.
Its sales fell by 4 per cent to 441 million pounds in the first
six month of this year, as profits nearly halved to 22 million
pounds, figures showed.
In 2011, Random House delivered 149 million pounds in operating
earnings before interest, tax and depreciation, with a revenue of 1.3
billion pounds.
Analysts in London said that the groups hope that a tie-up would
provide them with sufficient assets to compete with the growing
challenges faced by the business.
"Strategically it makes sense," said Ian Whittaker, an analyst at
Liberum Capital. "Book publishers face the threat of concentrated
buyers."
Any deal is likely to be referred to the competition authorities,
reports said.
The US Department of Justice earlier this year sued Apple and five
publishers, including Penguin, but not Random House, for alleged
collusion with Apple to fix the price for e-books.
Four of the five publishers have settled the claims but Penguin
has refused to follow suit, pledging to "mount a robust defence" on a
matter of principle, reports in the British media said.
