KKR Agrees To Buy Simon & Schuster for $1.62 Billion

In News by Porter Anderson

The acquisition of Simon & Schuster by KKR, Jonathan Karp says, is enhanced by KKR’s interest in company growth and employee equity.

Simon & Schuster in Manhattan. Image: Getty iStockphoto – Helen 89

By Porter Anderson, Editor-in-Chief | @Porter_Anderson

The All-Cash Deal Awaits Regulatory Approval
In an official announcement released today (August 7) and provided to Publishing Perspectives, the investment firm KKR (Kohlberg Kravis Roberts & Co.) has signed an agreement with Paramount Global to buy Simon & Schuster for US$1.62 billion in an all-cash transaction. The deal will need regulatory approval before closing, of course.

After the closing of the transaction, media messaging says, Simon & Schuster will become a standalone private company and will continue to be led by Jonathan Karp, president and CEO, and Dennis Eulau, COO and CFO.

As Jeffrey A. Trachtenberg at the Wall Street Journal has reported this afternoon, “The deal comes less than a year after a federal judge in late October 2022 blocked Penguin Random House from acquiring Simon & Schuster for about $2.18 billion, saying the deal would have financially harmed some authors.”

The fate of the Penguin Random House bid for Simon & Schuster would be followed by the departures of Markus Dohle—now succeeded as worldwide CEO by Nihar Malaviya—and the former PRH-USA CEO Madeline McIntosh.

Today’s statement supplied to the news media says, “In addition to investing in all areas necessary to establish Simon & Schuster as a standalone entity, KKR intends to support numerous growth initiatives, including extending Simon & Schuster’s strong domestic publishing program across various genres and categories, expanding its distribution relationships, and accelerating growth in international markets.

“KKR will also support Simon & Schuster in creating a broad-based equity ownership program to provide all of the company’s more than 1,600 employees the opportunity to participate in the benefits of ownership after the transaction closes. Since 2011, KKR portfolio companies have awarded billions of dollars of total equity value to more than 60,000 non-management employees across more than 30 companies.”

Bob Bakish

In a prepared statement, Paramount president and CEO Bob Bakish is quoted, saying, “We’re pleased to have reached an agreement on a transaction that delivers excellent value to Paramount shareholders while also positioning Simon & Schuster for its next phase of growth with KKR.

“The proceeds will give Paramount additional financial flexibility and greater ability to create long-term value for shareholders, while also delivering our balance sheet.”

KKR, today’s announcement says, “is making its investment in Simon & Schuster primarily through its North America Fund XIII and has secured fully committed financing for the transaction. The investment builds on KKR’s deep experience investing in content-oriented media businesses, including current and prior investments in Epic Games, Mediawan, Leonine Studios, Artlist, Skydance Media, BMG, and RBmedia, among others.

“LionTree Advisors is acting as financial advisor and Shearman & Sterling LLP is acting as legal advisor to Paramount. Simpson Thacher & Bartlett LLP is acting as legal advisor to KKR.”

Richard Sarnoff

Richard Sarnoff, chair of media with KKR, is quoted, saying, “We see a compelling opportunity to help Simon & Schuster become an even stronger partner to literary talent by investing in the expansion of the company’s capabilities and distribution networks across mediums and markets while maintaining its 99-year legacy of editorial independence.

We also believe the opportunity to create an ownership culture within one of the world’s top publishers has enormous potential to create value for all of Simon & Schuster’s stakeholders.”

Karp: ‘A Global Portfolio of Highly Regarded Companies’

In an interesting part of his memo to the Simon and Schuster staff today, Karp says, “On a personal note, I have known and admired one member of the KKR team, Richard Sarnoff, for two decades. Before joining KKR, Richard was executive vice-president and CFO at Random House, where we both worked.

“Richard understands the nuances of the book business as well as anyone I know. The Simon & Schuster team has enjoyed meeting Richard’s colleagues Ted Oberwager, Anne Arlinghaus, Chresten Knaff, Glenda Chan, David Hua, and Kate San, all of whom devoted countless hours to analyzing the intricacies of our business.”

And in positioning the news for the S&S workforce, Karp writes:

“Over the three years since the sale process initially began, we’ve had the privilege of meeting with numerous interested buyers. In the spring of 2023, we began a series of fascinating and stimulating conversations with members of KKR’s media and entertainment industry team about every aspect of our business, reflective of their keen interest in acquiring our company. All of us from Simon & Schuster who participated came away from those conversations impressed by KKR’s acumen, as well as their team’s desire to help our business grow and thrive in the future.

Jonathan Karp

“That commitment to growth is one of the reasons I’m so glad KKR will be our next owner.”Another reason is KKR’s commitment to our employees. Of all the prospective buyers we spoke to—and there were a lot of them—KKR was the only one that discussed its plans to support Simon & Schuster in creating an equity ownership program to provide all of our employees with the opportunity to participate in the benefits of ownership after the transaction closes. I’m looking forward to sharing those plans after the transaction is complete. …

“As the newest addition to the KKR family, we will be joining a global portfolio of highly regarded companies. Their investments in content-oriented media businesses include, among others, Epic Games, a leading video game and software developer and publisher; Axel Springer, a German digital media company that operates a range of publications, including Politico; ByteDance, the parent company of TikTok and other platforms for creativity and content; and Skydance Media, a leading film production company. …

“I understand that many of you will have questions about how this transition to new ownership will affect your work, and your benefits. I assure you that as this process unfolds we will share information with you. Meanwhile, it’s business as usual for all of us. As you have done so well throughout this process, let’s keep our noses in the books and our focus on delivering the best possible results for our authors and our distribution clients. That focus has been integral to our success and it’s the reason we can celebrate this outcome.

“I want to thank everyone at Paramount and LionTree for managing our sale with such thoughtfulness and care. I also want to thank those of you at Simon & Schuster who worked so diligently to provide a comprehensive view of our company to prospective buyers.

“As I’ve noted before, in our 99-year history, Simon & Schuster has had seven owners. From these transformations we have always emerged stronger, with each new challenge incorporating the spirit of innovation and entrepreneurship that infused the vision of our founders, and our constant commitment to excellence in publishing. With KKR’s support, we can look forward to benefiting from their experience in helping companies to grow, and to new strategies and opportunities that will enhance our ability to provide authors with the best possible publication they can receive. …

“Once again, my thanks for all you have done to make Simon & Schuster such an outstanding and valuable company.”

More from Publishing Perspectives on Simon & Schuster is here, more on the work of Jonathan Karp is here, more on mergers and acquisitions in publishing is here

About the Author

Porter Anderson

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Porter Anderson has been named International Trade Press Journalist of the Year in London Book Fair's International Excellence Awards. He is Editor-in-Chief of Publishing Perspectives. He formerly was Associate Editor for The FutureBook at London's The Bookseller. Anderson was for more than a decade a senior producer and anchor with CNN.com, CNN International, and CNN USA. As an arts critic (Fellow, National Critics Institute), he was with The Village Voice, the Dallas Times Herald, and the Tampa Tribune, now the Tampa Bay Times. He co-founded The Hot Sheet, a newsletter for authors, which now is owned and operated by Jane Friedman.