News Corp in bid for Penguin books

By Andrew Edgecliffe-Johnson, Gerrit Wiesmann and Robert Budden, FT.com

October 29, 2012 -- CNN

The headquarters of News Corporation in Manhattan, New York.

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

(Financial Times) -- News Corp has approached Pearson about a possible cash offer for its Penguin books business, threatening to derail talks about an all-share merger between Penguin and Bertelsmann's 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.

Full story at CNN

AND:

Penguin authors and agents 'terrified' at prospect of News Corp takeover.

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