LONDON — Penguin and Random House are to merge to create a leading publisher of English-language books as the pair seeks to cut costs in the face of fast-rising ebook publishing, their parent groups announced on Monday.
Penguin-owner Pearson and Random's parent, the German media giant Bertelsmann, said they would form a joint venture to be known as Penguin Random House.
Bertelsmann would own 53 percent and Pearson 47 percent, the pair said in separate company statements. The tie-up was expected to complete in the second half of next year, subject to regulatory approvals.
There could still be a late twist however, as reports over the weekend said that Rupert Murdoch?s News Corp., owner of publisher HarperCollins, was interested in buying Penguin, which was founded in 1935.
"The combination brings together two of the world's leading English language publishers, with highly complementary skills and strengths," said a statement from Pearson, whose chief executive Marjorie Scardino recently announced plans to step down.
"Random House is the leading English language publisher in the US and the UK, while Penguin is the world's most famous publishing brand and has a strong presence in fast-growing developing markets," the Pearson statement added.
Bertelsmann was to nominate five directors to the board of Penguin Random House and Pearson four. John Makinson, currently chairman and chief executive of Penguin, was to be chairman of Penguin Random House and Markus Dohle, currently chief executive of Random House, its chief executive.
"Our new company will bring together the publishing expertise, experience, and skill sets of two of the world's most successful, enduring trade book publishers," said Dohle.
"In doing so, we will create a publishing home that gives employees, authors, agents, and booksellers access to unprecedented resources."
Scardino added: "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."
The joint venture excludes Bertelsmann's trade publishing business in Germany, while Pearson is to retain rights to use the Penguin brand in education markets worldwide.
In 2011, Random House reported revenues of 1.7 billion euros ($2.2 billion) and operating profit of 185 million euros, while Penguin revenues hit £1.0 billion (1.2 billion euros, $1.6 billion) and operating profit £111 million.
"We believe the tie-up is a sensible one, although it is clearly a defensive response to the long-term pressures affecting the industry, including dramatic growth in digital retail channels, self-publishing and digital reading," said Jonathan Jackson, head of equities at stockbrokers Killik & co.
"The organisation will also generate synergies from shared resources such as warehousing, distribution, printing and central functions, although a precise figure is not disclosed."
Separately on Wednesday, Pearson said Penguin revenue from ebooks had soared 35 percent in the third quarter from a year earlier, helped by demand for titles including Mark Owen's "No Easy Day" and Ken Follett's "Winter of the World."
Random House has meanwhile profited hugely in recent months from publishing EL James' sado-masochistic romance "Fifty Shades of Grey," which is enjoying massive global popularity.
Meanwhile demand for ebooks are gaining momentum among European readers, despite a late start compared to the United States.
In Britain, where Amazon launched its Kindle ebook reader in 2010, consumer ebook sales accounted for about 13 percent of combined print and electronic sales in the first half of 2012, according to The Publishers Association.
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