Pearson PLC PSON Re Joint Venture

  Pearson PLC (PSON) - Re Joint Venture

RNS Number : 7207P
Pearson PLC
29 October 2012

Press release
29 October 2012




Pearson and Bertelsmann today announce an agreement to create the world's
leading consumer publishing organisation by combining Penguin and Random

The combination brings together two of the world's leading English language
publishers, with highly complementary skills and strengths. Random House is
the leading English language publisher in the US and the UK, while Penguin is
the world's most famous publishing brand and has a strong presence in
fast-growing developing markets. Both companies have a long history of
publishing excellence, and both have been pioneers in the dramatic industry
transformation towards digital publishing and bookselling.

Under the terms of the agreement, Penguin and Random House will combine their
businesses in a newly-created joint venture named Penguin Random House.
Bertelsmann will own 53% of the joint venture and Pearson will own 47%. The
joint venture will exclude Bertelsmann's trade publishing business in Germany
and Pearson will retain rights to use the Penguin brand in education markets

Bertelsmann will nominate five directors to the Board of Penguin Random House
and Pearson will nominate four. John Makinson, currently chairman and chief
executive of Penguin, will be chairman of Penguin Random House and Markus
Dohle, currently chief executive of Random House, will be its chief executive.

In reviewing the long-term trends and considerable change affecting the
consumer publishing industry, Pearson and Bertelsmann both concluded that the
publishing and commercial success of Penguin and Random House can best be
sustained and enhanced through a partnership with another major international
publishing house. They believe that the combined organisation will have a
stronger platform and greater resources to invest in rich content, new digital
publishing models and high-growth emerging markets. The organisation will
generate synergies from shared resources such as warehousing, distribution,
printing and central functions. Pearson and Bertelsmann intend that the
combined organisation's level of organic investment in authors and new product
models will exceed the total investment of Penguin and Random House as
independent publishing houses.

The two companies believe that the combination will create a highly successful
new organisation, both creatively and commercially, with the breadth and
investment capacity to deliver significant benefits. Readers will have access
to a wider and more diverse range of frontlist and backlist content in
multiple print and digital formats. Authors will gain a greater depth and
breadth of service, from traditional frontlist publishing to innovative
self-publishing, on a global basis. Employees of the new organisation will be
part of the world's first truly global consumer publishing company, committed
to sustained editorial excellence and long-term investment in a rich diversity
of content. And shareholders will benefit from participating in the
consolidation of the consumer publishing industry without having to deploy
additional capital.

The combination is subject to customary regulatory and other approvals,
including merger control clearances, and is expected to complete in the second
half of 2013.

In 2011, Random House reported revenues of €1.7bn (£1.48bn) and operating
profit of €185m (£161m). Penguin reported revenues of £1.0bn and operating
profit of £111m with total assets of £1.0bn. After completion, Pearson will
report its 47% share of profit after tax from the joint venture as an
associate in its consolidated income statement.

Under the terms of the agreement, neither Pearson nor Bertelsmann may sell any
part of their shareholding in Penguin Random House for three years. To protect
Pearson's interests as a minority shareholder, if Bertelsmann declines a
Pearson offer to sell its entire shareholding, Pearson may require a
recapitalisation by which Penguin Random House raises debt of up to 3.5x
EBITDA, with a dividend distributed to shareholders in line with their
ownership. In addition, from five years after completion, either partner may
require an IPO of Penguin Random House.

Marjorie Scardino, chief executive of Pearson, said: "Penguin is a successful,
highly-respected and much-loved part of Pearson. This combination with Random
House - a company with an almost perfect match of Penguin's culture, standards
and commitment to publishing excellence - will greatly enhance its fortunes
and its opportunities. Together, the two publishers will be able to share a
large part of their costs, to invest more for their author and reader
constituencies and to be more adventurous in trying new models in this
exciting, fast-moving world of digital books and digital readers."

Thomas Rabe, chairman and CEO of Bertelsmann, said: "With this planned
combination, Bertelsmann and Pearson create the best course for new growth for
our world-renowned trade-book publishers, to enable them to publish even more
effectively across traditional and emerging formats and distribution
channels.It will build on our publishing tradition, offering an extraordinary
diversity of publishing opportunities for authors, agents, booksellers, and
readers, together with unequalled support and resources."


For more information:


Luke Swanson / Simon Mays-Smith / Charles Goldsmith  +44 (0) 20 7010


Becca Sinclair
 +44 (0) 20
7010 4279

Brunswick (for US media enquiries):

Oliver Phillips
 + 1 212 333
3810 ext 669

About Pearson

Pearson is an international education and information company with
world-leading businesses in education, business information and consumer

Pearson is the world's leading learning company, providing educational
materials, technologies, assessments and related services to teachers and
students of all ages. We publish across the curriculum under a range of
respected imprints and are also a leading provider of electronic learning
programmes and of test development, processing and scoring services to
educational institutions, corporations and professional bodies around the

The Financial Times Group provides business and financial news, data, comment
and analysis, in print and online, to the international business community. It
includes the globally-focused Financial Times newspaper and website; a
range of specialist financial magazines and online services; and Mergermarket,
which provides proprietary forward-looking insights and intelligence to
businesses and financial institutions.

Penguin, founded by Allen Lane in 1935, is today one of the world's leading
English language publishers and the most famous brand in the industry. Penguin
publishes 4,000 titles every year for readers of all ages and in print and
digital formats. Its extensive range of titles includes top literary prize
winners, classics, reference volumes and children's titles.

                     This information is provided by RNS
           The company news service from the London Stock Exchange


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