- April 22, 2013
Bertelsmann announced late last week that the merger between Penguin and Random House had passed muster in Canada. According to the press release both the Department of Canadian Heritage and the Canadian Competition Bureau have signed off on the deal.
Authorities in the US, EU, UK, NZ, and Australia have already okayed the merger, leaving only India and South Africa as the last 2 countries to finish their regulatory assessment (or at least I cannot see any sign that they hve approved the merger). This deal will also encompass Penguin’s operations in China as well as Random House Mondadori, a Spanish language publisher that operates in Spain and the Americas.
When the deal is finalized, the new conglomerate will be 53% owned by Bertelsmann and 47% owned by Pearson. The deal was originally announced last October and has been winding its way through the regulatory process ever since.
On a related note, one of my reader’s has been arguing that this deal is part of Pearson’s plan to get out of trade publishing. I’m still not so sure, but then again I may not fully understand the financial aspects mentioned in the original press release:
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.
Would anyone care to explain the above paragraph? I understand what the words say but I think I missed the context of the deal.
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