By Porter Anderson, Editor-in-Chief | @Porter_Anderson
A Two-Year SagaThe parent company of Simon & Schuster, Paramount Global, made a federal filing on Monday (November 21), officially confirming that it will not keep open its agreement with Germany’s Bertelsmann to sell S&S to Penguin Random House.
As Reuters’ Abigail Summerville and Anirban Sen reported the news on Monday, Bertelsmann is expected to owe Paramount a US$200 million termination fee because the deal hasn’t succeeded, after Judge Florence Yu Pan’s order in the United States blocked the proposed merger.
Jeffrey A. Trachtenberg at the Wall Street Journal has reported that the termination date for the agreement was, in fact, November 21, meaning that the deal’s proposal and its demise took two years to play out. Trachtenberg and Jessica Toonkell had reported on Sunday evening (November 20) that Paramount was, in fact, expected to opt to close the door on any appeals.
You may recall that Penguin Random House’s response to Pan’s ruling had been that it would seek an expedited appeal. Paramount’s move to close the deal means that Simon & Schuster’s parent company isn’t interested in waiting for that appeal process. Katy Hershberger at Publishers Lunch has pointed out that Judge Pan now “sits on the very Court of Appeals that would review the decision.”
A statement from Paramount Global on Monday afternoon confirms that the company does expect its termination fee and implies that it intends to seek another buyer, the company writing, “Simon & Schuster remains a non-core asset to Paramount, as was determined in early 2020 when Paramount conducted a strategic review of its assets. Simon & Schuster is a highly valuable business with a recent record of strong performance, however it is not video-based and therefore does not fit strategically within Paramount’s broader portfolio.”
Lunch‘s Michael Cader has suggested that the experience of the two-year process of regulatory review just ended is likely to make a “a financial buyer (such as a private equity company)” look good to Paramount because it should be able to “complete a transaction with minimal regulatory review.”
Reactions to the Deal’s Closure
The PRH response: “Penguin Random House remains convinced that it is the best home for Simon & Schuster’s employees and authors, and together with Bertelsmann, we did everything possible to complete the acquisition.
“We believe the judge’s ruling is wrong and planned to appeal the decision, confident we could make a compelling and persuasive argument to reverse the lower court ruling on appeal.
“However, we have to accept Paramount’s decision not to move forward. We want to thank our Penguin Random House employees and the teams at Simon & Schuster for their support. We wish them the very best in the future, and look forward to continuing to make a positive impact on society through the books we are honored to publish for readers everywhere.”
At Simon & Schuster, president and CEO Jonathan Karp on Monday afternoon wrote to the staff, saying:
“I am writing today because, as you may have heard, Paramount has terminated its agreement to sell Simon & Schuster to Penguin Random House, and there will be no appeal of Judge Florence Pan’s decision to block the merger of the two companies.
“This news is still fresh, and at this point I have no specific information to impart about what will happen in the coming months. You may read or hear rumors and speculation about our future, but you can be assured that I will keep you informed as soon as there is pertinent news I can share.
“I am grateful for your patience and dedication to our mission during all that has transpired over these many months since the sale began. Ultimately, what matters the most is the work we do together, on behalf of our authors and our books. Over the past three years, we have reached new heights of accomplishment. Simon & Schuster has never been more profitable and valuable than it is today. And that is because of the effort, ingenuity, and perseverance that you bring to our endeavors.
“As we put the finishing touches on one of the single greatest years in our history and head into 2023, I see numerous reasons to be optimistic about our future. We’ll be starting the new year with some tremendously exciting, sure-to-be-bestselling titles, which will be buttressed by the sales of what is currently the best-selling backlist in the publishing industry. As I have noted before, we will be celebrating our 100th anniversary in April of 2024, regardless of who our owner is–and we will have much to celebrate.”
Indeed, as Elizabeth A. Harris, Alexandra Alter, and Benjamin Mullin have written at The New York Times, “This extends a period of uncertainty at Simon & Schuster, but it is one they are in a good position to navigate. The company’s recent performance has been strong, even as the results have sagged at other major publishers. Its profits for the first nine months of the year were up 29 percent compared to the same time last year, putting it on its way to a having a record-breaking year.”
And from the United States’ leading author-advocacy organization, the Authors Guild, the reaction is entirely upbeat.
“We are grateful this has come to a conclusion,” says Mary Rasenberger, the guild’s CEO in a statement released to the news media.
“The lower court’s legal analysis, and determination of economic impact the merger would have on the market for anticipated bestsellers, was well reasoned and grounded in precedent, so it would not have been easy to reverse it on appeal, but we were ready to oppose it if we had to.
“We will oppose any mergers among the ‘Big Five’ in the future. As the court’s analysis in the Penguin Random House lawsuit makes clear, the market for anticipated top-selling books is already highly concentrated. If either HarperCollins or Hachette were allowed to buy Simon & Schuster, while the resulting company would not be as big as Penguin Random House and Simon & Schuster combined, it would result in only four major publishers that regularly pay the kind of advances authors need to sustain a living (more or less) writing. It means there would be less competition for manuscripts, and it also makes it that much more difficult for small publishers to compete.
“A healthy publishing ecosystem is one that has many publishers of different sizes with different tastes, interests, views, and degrees of risk they are willing to assume. The bigger any of the Big Five is, the harder it is for the smaller and newer publishers to compete.”
Simon & Schuster, founded in 1924, publishes more than 2,000 books per year, has a workforce of some 1,500 employees, and in 2021 cited having 219 New York Times bestsellers, 29 of them going to No. 1.
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