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Penguin and Random House owners agree joint venture

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Publisher Pearson has agreed a deal with German media giant Bertelsmann to combine the Penguin and Random House operations.

The two businesses are to come together in a new multi-billion pound joint venture called Penguin Random House.

Bertelsmann will own 53% of the venture, while Pearson will own 47%. The venture will exclude Bertelsmann's trade publishing business in Germany, and Pearson will retain rights to use the Penguin brand in education markets worldwide.

The two companies confirmed last week that they were discussing a deal, but The Sunday Times claimed yesterday that Rupert Murdoch's News Corporation intended to intervene.

The paper said that News Corp, which already owns publisher HarperCollins, was prepared to pay around £1bn for Penguin.

Instead, Penguin and Random House are to be combined in the first such merger between the world's big six publishers.

Pippa Middleton arrives for the launch party of her party-planning book, Celebrate, at Daunt Books in London.
Random House is successful in the US and UK, while Penguin is the world's most famous publishing brand and has built a strong presence in emerging markets.

However, both publishers are also struggling to cope with the shift to eBooks and new digital publishing models.

This tie-up will give them more negotiating muscle, particularly with market leading retailer Amazon, along with greater freedom to experiment with new technologies.

In a media statement, the two companies said that Penguin Random House "will have a stronger platform and greater resources to invest in rich content, new digital publishing models and high-growth emerging markets".

The organisation will also benefit from shared resources, such as warehousing, distribution, printing and central functions.

Marjorie Scardino, chief executive of Pearson, said: "Penguin is a successful, highly-respected and much-loved part of Pearson.

"This combination with Random House - a company with an almost perfect match of Penguin's culture, standards and commitment to publishing excellence - will greatly enhance its fortunes and its opportunities.

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"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."

Bertelsmann chief executive and chairman Thomas Rabe added: "With this planned combination, Bertelsmann and Pearson create the best course for new growth for our world-renowned trade-book publishers, to enable them to publish even more effectively across traditional and emerging formats and distribution channels.

"It will build on our publishing tradition, offering an extraordinary diversity of publishing opportunities for authors, agents, booksellers and readers, together with unequalled support and resources."

In 2011, Random House reported revenues of €1.7bn (£1.48bn) and operating profit of €185 million (£161m). Penguin reported revenues of £1bn and an operating profit of £111m. It has total assets of £1bn.

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.

The merger is subject to regulatory and other approvals, including merger control clearances, but is expected to close in the second half of 2013.

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