ViacomCBS To Sell Simon & Schuster To Penguin Random House Parent Bertelsmann For Close To $2.2 Billion In Cash

Simon & Schuster

UPDATED with comment by News Corp CEO Robert Thomson:

ViacomCBS announced Wednesday it will sell the storied Simon & Schuster publisher to Penguin Random House house parent Bertelsmann for $2.175 billion in cash, a major infusion of funds as the Bob-Bakish run media company makes good on its promise to unload non-core assets.

ViacomCBS called the transaction “the outcome of a highly competitive auction that attracted interest from buyers around the world, reflecting Simon & Schuster’s position as a global publisher with some of the world’s best known books.”

Bertelsmann said Simon & Schuster will continue to be managed as a separate publishing unit under the Penguin Random House umbrella with CEO Jonathan Karp and COO/CFO Dennis Eulau continuing at the helm.

“Penguin Random House empowers its 320 publishers around the world with maximum
creative and entrepreneurial freedom and will, of course, extend this to our new colleagues at Simon & Schuster,” said Markus Dohle, CEO Penguin Random House and a member of the Bertelsmann Executive Board.

The deal is expected to close in 2021, subject to regulatory approval. Penguin Random House is already the world’s biggest trade publisher and, in a nod to potential scrutiny by federal watchdogs, Bertelsmann has agreed to take all steps necessary to obtain regulatory approvals, including a termination fee payable to ViacomCBS if the transaction does not close for regulatory reasons.

As Deadline reported last week, bids were due before Thanksgiving. News Corp.’s publisher HarperCollins and Vivendi of France, which also owns significant publishing assets, had also been in the running.

News Corp. CEO Robert Thomson, who last week called a potential Simon & Schuster-Penguin Random House deal “a serious antitrust issue,” weighed in Wednesday as well, saying a combination defies “market logic.”

“There is clearly no market logic to a bid of that size – only anti-market logic. Bertelsmann is not just buying a book publisher, but buying market dominance as a book behemoth,” the executive said in a statement Wednesday. “Distributors, retailers, authors and readers would be paying for this proposed deal for a very long time to come. This literary leviathan would have 70 percent of the US Literary and General Fiction market. There will certainly be legal books written about this deal, though I wonder if Bertelsmann would publish them,” Thomson said.

The sale follows a strategic review of non-core assets ViacomCBS began in 2020. Proceeds from the transaction will be used to invest in ViacomCBS’s strategic growth priorities, including in streaming, as well as to fund the dividend and pay down debt, ViacomCBS said.

Simon & Schuster was founded in 1924 by Richard Simon and M. Lincoln Schuster with a a crossword puzzle book, the first ever produced and a runaway bestseller. Its Pocket Books, from 1939, was America’s first paperback publisher.

It has more than 30 publishing units across adult, children, audio and international. Its portfolio of authors includes Stephen King, Doris Kearns Goodwin and Jason Reynolds, and a backlist of titles including Catch-22 and The 7 Habits of Highly Effective People. In total, the company has 2,000 new publications annually and a catalog of 35,000 titles.

Bertelsmann chairman-CEO Thomas Rabe called the purchase another “strategic milestone” in strengthening the company’s global content businesses. Bertelsmann also owns Fremantle TV and BMG music division. It launched first as a religious publisher 185 years ago with the founding of C. Bertelsmann Verlag. The parent, based in Gütersloh, a city in North Rhine-Westphalia in west-central Germany, currently invests around €6 billion (or over $7 billion) in content annually, Rabe said.

The price tag was above initial expectations of some on Wall Street. ViacomCBS noted that the purchase price of $2.175 billion implies an approximate 15x LTM OIBDA multiple, “which compares favorably with comparable public company and sum-of-the-parts transaction multiples.” (An LTM OIBDA multiple is a valuation metric that shows earnings before interest, taxes, depreciation, and amortization adjustments for the last 12-month period.)

ViacomCBS said it will work closely with Penguin Random House to minimize disruptions for Simon & Schuster employees, authors and partners, and Simon & Schuster will continue to be a part of ViacomCBS until the deal closes.

LionTree Advisors is the financial advisor and Shearman & Sterling legal advisor to ViacomCBS in the transaction.

The deal caps decades of consolidation across the publishing industry. Bertelsmann acquired Bantam in the 1970s, Doubleday in the ’80s, Random House in the ’90s and acquired 100% ownership of Penguin from Pearson in 2019.

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