Sales Soaring, Publishers Buying And Selling

Michael Hedges November 21, 2020 - updated November 27, 2020 Follow on Twitter

Of course, mergers and acquisitions are heating up again in the media world. It’s a cyclical thing. Some shareholders eye expansion in this time of consolidation. There are bargains to be had. Others are ready to cash-out. Hold on to your hats.

ViacomCBS is about to call time on book publisher Simon & Schuster (S&S). Chief executive Bob Bakish announced this past March it would divest S&S and accept bids. “Simon & Schuster is not a core asset,” he said to an investor conference, quoted by Hollywood Reporter (March 4). “It’s not video-based.” That new streaming platform will need money. Then there is football rights. He also indicated readiness to part with Black Rock, the long-time CBS headquarters building in Manhattan. Earlier this year ViacomCBS exited cable TV channel CNET.

The bid results are expected this next week (November 26). The asking price is on the order of US$1.7 billion, a bit more than two-times cashflow. After bottom-fishing private equity firms dropped out three leading contenders, reportedly, are left standing: News Corporation, Bertelsmann and Vivendi, each with extended international footprints. There may be others by the time the envelops are opened but don’t bet on a big surprise.

News Corporation, owner of publisher HarperCollins, has submitted a bid, reported the New York Times (November 16). Two days later chief executive Robert Thomson dismissed (sort of) such talk as “speculation and scuttlebutt.” He then, without subtilty, ripped into Bertelsmann. “However cute and clever the structure, if Bertelsmann is a beneficiary, it will be a book behemoth and this will certainly be a profound antitrust issue for the entire book industry and no doubt for authors around the world,” quoted by Bloomberg (November 18).

Acquiring S&S is “of interest,” said Bertelsmann chief executive Thomas Rabb to the Financial Times (November 17). Bertelsmann owns publisher Penguin Random House, arguably the biggest trade publisher in the world. He had no further comment. Bertelsmann owns broadcaster RTL and magazine publisher Gruner+Jahr.

Vivendi might not seem to be a likely bidder. Publishing has not been its thing until recently. It acquired the Editis publishing house earlier this year. However, Vivendi knows the very similar music publishing business as principal owner of Universal Music Group. Principal investor Vincent Bollore is currently stalking Lagardère Group, which owns French publisher Hachette Livre also with a global footprint. Rumors that Lagardère Group might itself bid on S&S have quieted in the final bidding hours.

Trade press publishers, those offering fiction and non-fiction, are thriving during the coronavirus lockdowns. Major publishers, certainly those mentioned, have moved a lot of books to certain audiences fatigued by television. Penguin Random House, through the Crown Publishing subsidiary, claims the best seller by former US president Barack Obama - A Promised Land - released last week. It sold 890,000 copies in 24 hours in the US and Canada alone.

Unsuccessful bidders for S&S could be attracted to another large boo publisher coming on the market this month. Houghton Mifflin Harcourt, now principally an educational publisher, is offering its trade book publishing to the highest bidder. It is best known for children’s books like The Little Prince and, of course, the JRR Tolkien catalogue.

UPDATE - Keeping precisely to schedule US media house ViacomCBS announced this past week (November 25) a purchase and sale agreement with Bertelsmann SE for book publisher Simon & Schuster. The lofty price tag is US$2.175 billion, rather more than the suggested retail range of US$1.2 to US$1.7 billion and 15 times cashflow. Bertelsmann is paying cash, certainly very attractive for the seller. The deal is expected to close in the coming year, antitrust examination notwithstanding.

Simon & Schuster will become a subsidiary of Penguin Random House, but will retain independent management under chief executive Jonathan Karl. On closing, Bertelsmann will hold about one-third market share of US book publishing. “The book business has been part of Bertelsmann’s identity since the founding of C. Bertelsmann Verlag more than 185 years ago and has lost none of its appeal to this day,” said chief executive Thomas Rabe in a statement. (See more about Bertelsmann/RTL here)

Failing in its bid for Simon & Schuster was HarperCollins, publishing subsidiary of News Corporation, principally controlled by the Murdoch family. Grumpy they were. “There is clearly no market logic to a bid of that size, only anti-market logic,” said News Corp chief executive Robert Thomson in a rather revealing statement (November 25). “Bertelsmann is not just buying a book publisher, but buying market dominance as a book behemoth. Distributors, retailers, authors and readers would be paying for this proposed deal for a very long time to come. This literary leviathan would have 70 percent of the US Literary and General Fiction market. There will certainly be legal books written about this deal, though I wonder if Bertelsmann would publish them.” (See more about News Corporation here)

In the last year Simon & Schuster published several bestsellers highly critical of outgoing US President Donald Trump, including Bob Woodward’s Rage. Penguin Random House has published recent bestsellers from former US President Barack Obama and Michelle Obama. One wonders if News Corp would have published them.

See also in ftm Hot Topics

• Hot Topics - News Corp/Rupert Murdoch

• Hot Topics - Bertelsmann/RTL

• Hot Topics - Vivendi