WSJ Update: Penguin, Random House in Deal

By Jessica Hodgson

LONDON--Pearson PLC and Bertelsmann A.G., two of the world's biggest media groups, agreed Monday on a plan to combine their book-publishing operations, Random House and Penguin.

German media giant Bertelsmann said Monday that it plans to create a joint venture between Random House and Pearson's Penguin, with Bertelsmann taking a 53% stake in the new company and Pearson taking 47%. Bertelsmann and Pearson didn't disclose the value of the joint venture, but a person familiar with the matter indicated that the equity valuation would be somewhere between $2 billion and $3 billion.

Markus Dohle, currently chief executive officer of Random House, would become CEO of the combined company, with John Makinson, the present chairman and CEO of Penguin, taking the role of chairman, Bertelsmann said in a statement.

The details follow weekend reports that News Corp., owner of The Wall Street Journal and HarperCollins Publishers, had separately expressed interest in Penguin. News Corp.'s interest in Penguin hasn't been confirmed. Neither News Corp. nor Pearson could be immediately be reached for comment Monday.

The rush of interest in Penguin has been sparked by the announcement earlier this month that Marjorie Scardino, Pearson's long-term CEO, will retire by 2013.

The joint venture highlights the headwinds facing publishers from the growth of electronic books and the increasing power of Web retailers such as Amazon.com Inc., Apple Inc. and Google Inc.

The combination between Penguin and Random House would create a book-publishing powerhouse responsible for roughly a quarter of global English-language consumer book sales. In the U.S. alone, it would bring together some of the world's best-known authors. Random House authors in the U.S. include John Grisham, Toni Morrison and erotic writer E.L. James, while Penguin Group authors including Patricia Cornwell, Junot Diaz and Tom Clancy.

Bertelsmann said it expects the deal to close, subject to antitrust approval, in the second half of 2013.

Jeffrey A. Trachtenberg contributed to this article.

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