Pearson to sell remaining stake in Penguin Random House

In a recent development, which will end the company’s nearly 50 years of association with consumer publishing, Pearson is planning to sell its 25% stake in Penguin Random House to German partner Bertelsmann. The USD 675-million deal will be the final move by the Pearson CEO John Fallon, who sought to transform Pearson from a conglomerate to a world leader in digital education, notably by selling the Financial Times, a 50% stake in the Economist and spinning off Penguin into a joint venture with Bertelsmann in 2013.

19 Dec 2019 | By PrintWeek Team

According to Pearson, Fallon would step down next year after seven years as chief executive as soon as a successor was found.

The disposal of PRH to its co-owning partner, which already had a 75% stake in the trade publisher, will generate net proceeds of roughly 5300-m pound sterling. The deal will see Bertelsmann become sole owner of the world's biggest trade publishing group.

Fallon said the sale is the part of an ongoing process of “simplification” for Pearson, that it enabled company “to be completely focused” on its education and digital learning business.

The transaction puts a value on the PRH venture of USD 3.67-bn, compared with the USD 3.55-bn enterprise valuation in 2017 when Pearson sold a 22% stake in the joint venture. In 2018 PRH reported revenues of USD 3.7-bn. The company’s total stake in PRH has generated about 1.9-bn pound in net disposal proceeds and dividends for Pearson.

“For almost 50 years, Pearson has been proud to play our part in the publishing and commercial success of first Penguin and then more recently Penguin Random House,” said Fallon. “With the sale of our remaining stake to our partners, Bertelsmann, we know the company is in good hands — and we wish our colleagues and authors every future success. This enables Pearson now to be completely focused on building the world’s leading digital learning company, linking education to employability and skills, and reaching more learners around the world to support them through a lifetime of learning.”

Penguin, founded in 1935 by Allen Lane and his brothers, revolutionised the book market by selling paperbacks for as little as six pence. It was bought by Pearson in 1970, a decade after it published DH Lawrence’s long-banned Lady Chatterley’s Lover.

Penguin Random House, which published Michelle Obama’s memoir Becoming and counts Tom Clancy and Margaret Atwood in its list of authors, reported revenue of USD 3.7-billion and operating profit of USD 467-million in 2018. It contributed USD 87-million after tax to Pearson’s adjusted operating profit.

Bertelsmann chief executive Thomas Rabe said owning all of the publishing group, which had 481 titles in the New York Times bestseller list last year, was a “milestone for Bertelsmann”. He said Bertelsmann would continue to expand Penguin Random House through organic growth and acquisitions.

(Courtesy Reuters; The Bookseller)