$2.2B Penguin Random House, Simon & Schuster Merger Called Off

A $2.2 billion merger between book publishing titans Penguin Random House and Simon & Schuster has been called off following a judge’s decision to block the major deal.

On October 31, Judge Florence Pan of the U.S. District Court for the District of Columbia ruled that the Department of Justice had proved that the deal could have a significant negative effect on competition "in the market for the U.S. publishing rights to anticipated top-selling books."

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Penguin Random House's attempt to acquire Simon & Schuster was determined to be illegal by Judge Pan because it would negatively impact authors' pay.

Over a year ago, in November 2021, the DOJ filed suit to stop the deal going through.

Bertelsmann, a German private multinational conglomerate and one of the world's largest media conglomerates, owns Penguin Random House. Initially, Bertelsmann indicated it would appeal the decision, but it later released a statement saying it now "will advance the growth of its global book publishing business without the previously planned merger of Penguin Random House and Simon & Schuster."

Bertelsmann backed down from challenging Judge Pan’s decision after failing to convince Paramount Global, which owns Simon & Schuster, to extend the deal agreement between the two companies and appeal the judge's decision.

Bertelsmann was originally founded as a publishing house by Carl Bertelsmann in 1835.

The Biden administration, continuing its anti-monopoly stance, had opposed the deal from the start, arguing it would result in lower advances for authors who earn $250,000 or more and less competition for blockbuster books.

In August hearings for the case, the administration claimed that the five largest publishers (Penguin Random House, HarperCollins, Macmillan, Simon & Schuster, and Hachette) currently control 90% of the publishing market, and that if the deal were to go through, Penguin Random House and Simon & Schuster would control nearly 50% of the market for publishing rights to blockbuster books. The administration argued that the nearest competitors would then be less than half the size.

Penguin Random House now will have to pay Paramount Global a $200 million termination fee.