Penguin, Random House to merge into world leading publisher

Education, media and publishing giant Pearson Group on Monday announced a merger plan between its publishing arm Penguin and German publisher Bertelsmann's Random House to create a world leading publishing organization.

Pearson and Bertelsmann have agreed to establish a joint venture named Penguin Random House headquartered in New York, of which Bertelsmann will own a 53-percent stake and Pearson 47 percent. Both must keep their shares in the venture for at least three years.

Under the plan, the new joint venture will exclude Bertelsmann's trade publishing business in Germany and Pearson will retain rights to use the Penguin brand in education markets worldwide.

Penguin chairman and chief executive John Makinson will be chairman of Penguin Random House, and Markus Dohle, currently chief executive of Random House, will be its chief executive.

Penguin Random House is estimated to seize 25 percent to 30 percent of the global consumer publishing market. Pearson and Bertelsmann hope to cope with the ebook era through combination of the two leading publishers.

The two sides believe that the combined organization will have a stronger platform and greater resources to invest in new digital publishing models and high-growth emerging markets, and they will also save their money on joint warehousing, distribution and printing.

The merger is expected to complete in the second half of next year, and Pearson chief financial officer Robin Freestone said the deal would be approved.

Random House was the biggest English language publisher in the United States and Britain in the first nine months this year, while Penguin has maintained a strong presence in fast-growing developing markets.

In 2011, Random House reported revenues of 1.7 billion euros (2.2 billion US dollars) and operating profit of 185 million euros (239 million dollars), while Penguin reported revenues of 1 billion pounds (1.6 billion dollars) and operating profit of 111 million pounds (178 million dollars).