New Buyers Emerge for Book Publisher Simon & Schuster

From a Wall Street Journal story by Jessica Toonkel and Jeffrey A. Trachtenberg headlined “New Buyers Emerge for Simon & Schuster”

HarperCollins Publishers and KKR & Co. are among the bidders for Simon & Schuster, as the book publisher pursues a sale for the second time in less than three years, according to people familiar with the situation.

Penguin Random House, the world’s largest consumer book publisher, agreed to buy Simon & Schuster for about $2.18 billion in November 2020, only to have the Justice Department file a lawsuit in federal court in Washington, D.C., opposing the sale. A court sided with the government and blocked the deal last year.

HarperCollins is betting that its bid wouldn’t meet a similar fate. The company is the No. 2 book publisher behind Penguin, with an 11% share of the U.S. market for print books, while Simon & Schuster is No. 3 with 6%, according to figures from Circana BookScan. Penguin Random House has a 21% share of that market.

HarperCollins, like The Wall Street Journal, is owned by News Corp.

U.S. District Judge Florence Pan, who oversaw the Penguin Random House case, appeared to leave the door open for another strategic buyer.

“Other potential buyers from the publishing industry have shown interest in acquiring S&S and it is just as likely that another publishing company will prevail in a future sale,” Judge Pan wrote in an amended memorandum opinion last November.

Private-equity giant KKR has been an active investor in media properties and its portfolio includes investments in companies such as production company Skydance Media, Epic Games, publishing giant Axel Springer and talent-and-entertainment conglomerate Endeavor.

Second round bids for Simon & Schuster are due in mid-July, according to some of the people familiar with the situation. Paramount Global, the parent company of Simon & Schuster, expects to conclude the sale by the end of the summer.

Simon & Schuster had a stellar year in 2022, with revenue rising 19% to $1.18 billion and operating profit increasing 16% to $248 million. Titles from star authors such as Colleen Hoover and Stephen King enabled the publisher to flourish on the bestseller list. In the first quarter of 2023, sales at the publishing house rose 19% to $258 million while operating profit increased 16% to $58 million.

The general book business, however, is struggling as consumers resume normal lives following the pandemic. Print book sales through the week ended June 10 were down 2.5% compared with the same time frame a year ago, according to Circana BookScan.

HarperCollins recently reported flat revenue of $515 million for the quarter ended March 31, with segment earnings before interest, taxes, depreciation and amortization declining 9% to $61 million.

The government’s case against the Penguin deal focused on competition between publishers for authors rather than how consumer prices would be affected by the merger.

The judge in the case cited findings that Penguin Random House and Simon & Schuster together would have controlled approximately 49% of the market for anticipated top-selling books. The decision was hailed by some agents and writers who feared the merger would give the combined company too much market clout.

During the trial, Hachette Livre, which includes all of Lagardere’s global book-publishing interests, and HarperCollins, each expressed interest in owning Simon & Schuster. Hachette hasn’t submitted a bid.

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