October 29, 2012 -- CNN
STORY HIGHLIGHTS
- News Corp has approached Pearson about a possible cash offer for its Penguin books business
- Threatens to derail talks about an all-share merger between Penguin and Random House division
Bertelsmann, News Corp and
Pearson, which owns Penguin and the Financial Times, declined to comment. One
person familiar with the situation said an approach had been made "at the
highest level" of Pearson, but cautioned that a firm bid would be subject to due
diligence.
Two people familiar with
Bertelsmann's position said it was racing to keep its planned merger on track
after the Sunday Times, owned by News Corp, reported that Rupert Murdoch could
offer about £1bn to add Penguin to its HarperCollins publishing arm.
The German media group, led by
Thomas Rabe, could struggle to find the funds to mount a counterbid for
Penguin.
HarperCollins would offer
Pearson, which makes three-quarters of its revenue from education, cash and a
simple exit from the slowest-growing part of the group rather than a minority
stake in an enlarged publishing joint venture, where Bertelsmann and Pearson
would share cost savings.
Either deal is likely to require
regulatory approval, but a bid for Penguin from HarperCollins could face less
scrutiny than a merger with Random House, as Random House is already the market
leader in most big countries. HarperCollins is third or fourth in most markets
after Penguin.
Analysts had already seen the
mooted Penguin-Random House merger as a potential first step towards a sale by
Pearson. Marjorie Scardino's plan to hand over as chief executive to John
Fallon, head of Pearson's international education division, had reignited
speculation that Pearson might sell its non-education businesses, Penguin and
the FT Group.
A Penguin takeover would
significantly expand HarperCollins' book publishing unit and give it one of the
industry's few strong consumer brands at a time when Mr Murdoch is planning to
split off News Corp's publishing assets and Australian holdings from its
television and film businesses.
Like Random House, it could find
savings from eliminating duplicated costs and strengthen its position with
powerful ebook retailers such as Amazon, Apple and Google, and with physical
bookstore chains such as Barnes & Noble.
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