Penguin, Random House Merge to Create Publishing Giant

Penguin and Random House merge despite last minute News Corp. bid

Penguin and Random House said Monday they have reached an agreement to merge, in a deal that will combine two of the world's largest and more prominent book publishers.

Getty ImagesPearson, the parent company of Penguin, and Bertelsmann, the media conglomerate behind Random House, said they believed pooling resources will allow them to better compete in a publishing industry making a difficult transition from print to digital distribution.

“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," Marjorie Scardino, chief executive of Pearson, said in a statement.

Talks between the companies were reported earlier this month, but a wrinkle in a possible union appeared this weekend.The Sunday Times reported that News Corp. was preparing a $1.6 billion offer for Penguin.

The companies expect the merger to be completed by the second half of 2013. Penguin and Random House will combine their businesses into a newly-created joint venture named Penguin Random House, with Bertelsmann controlling 53 percent and Pearson owning 47 percent. The joint venture will not include Bertelsmann’s trade publishing business in Germany. Moreover, Pearson will continue to control the rights to use the Penguin brand in education markets worldwide.

In deference to its larger stake in the company, Bertelsmann will nominate five directors to the board and Pearson will nominate four. John Makinson, currently chairman and chief executive of Penguin, will be chairman of Penguin Random House and Markus Dohle, currently chief executive of Random House, will be its chief executive.