European regulator approves Random House, Penguin £2.4 bn merger

The European regulator today approved the proposed merger between Europe's two biggest book publishers Random House and Penguin

Regulators in US and New Zealand have already approved the merger, while China, Canada and the Austrian regulators are yet examining the proposed merger.

"The merged entity will continue to face several strong competitors," the European Commission (EC) said in a statement.

In October last year, Penguin group, renowned publishing brand owned by media conglomerate Pearson Plc had agreed to merge its business with Random House, one of the world's largest book publishers owned by German media giant Bertelsmann, in a deal worth approximately £2.4 billion. (See: Penguin, Random House in £2.4-bn merger pact)

The combination brings together two of the world's leading English language publishers and create the world's leading trade publisher.

Random House is the leading English language publisher in the US and the UK, while Penguin is the world's most famous publishing brand and has a strong presence in fast-growing developing markets.

Under the merger pact, both companies will create a joint venture called Penguin Random House, which will be 53-per cent owned by Bertelsmann, with Pearson owning the remaining 47 per cent. The new business will not include Bertelsmann's publishing business in Germany.

Bertelsmann is an international media company whose core divisions encompass television and television production, trade publishing, magazine publishing, music rights management and services in some 50 countries.

Pearson is active in publishing educational materials, business information through the Financial Times and trade publishing through Penguin, which includes Dorling Kindersley Books and Rough Guides.

Penguin Random House will contain all of the English language trade publishing divisions of Bertelsmann's Random House division in the US, Canada, the UK, Australia, New Zealand, India and South Africa; the Spanish language trade publishing divisions of Bertelsmann's Random House division in Spain and Latin America, but not Bertelsmann's German language trade publishing division Verslagsgruppe Random House.

It will also contain all of Penguin's business and assets including its US, European, Australasian and Indian trade publishing divisions, its trade publishing company in China and its 45 per cent stage in a Brazilian Portuguese language publishing house.

THE EC said that it assessed the impact of the transaction on the upstream markets for the acquisition of authors' rights for English language books in the European Economic Area (EEA) and worldwide, and on the downstream markets for the sale of English language books to dealers in the EEA, in particular in the UK and Ireland.

The EC found that on both types of markets the new entity Penguin Random House will continue to face competition from several large and numerous small and medium sized publishers. As regards the sale of English language books, the merged entity will furthermore face a concentrated retail base, such as supermarkets for print books and large online retailers for e-books, like Amazon.

The Brussels-based regulator also assessed the impact of the deal on third-party book distribution, where both Random House and Penguin are active, as well as on the book production market given the vertical relationship between Bertelsmann's activities in book production through its Arvato division and BePrinters and Penguin Random House's activities in the sale of English language books to dealers.

The EC said that it found that the both Penguin and Random House have low market shares and that there are many alternative suppliers for book production and third party book distribution services in the EEA.