Bidding on Simon & Schuster ends

The sale of Simon & Schuster appears to be nearing an exciting conclusion, as the final chapter of a page-turner from one of the nation’s largest and most prestigious publishers.

The second round of bidding for Simon & Schuster – which publishes big-name names like Stephen King – was due earlier this week, according to three people familiar with the negotiations, who spoke on condition of anonymity to discuss the confidential sale process. Two of them said the remaining bidders included KKR, one of the world’s largest private equity firms, and News Corp, the owner of HarperCollins, a rival publisher.

The sale process is expected to conclude in the coming weeks, the people said.

A sale would end years of uncertainty for Simon & Schuster, which is owned by Paramount (formerly ViacomCBS) and was originally put up for sale in early 2020.

How much the suitors of Simon & Schuster were willing to pay could not be determined. The last time the publisher went on the block, rival Penguin Random House agreed to pay $2.2 billion, but the Justice Department blocked that deal.

The deal with Penguin Random House, the largest publisher in the country, was widely expected to sail through regulatory hurdles. But the Biden administration sued to stop the acquisition, arguing it would be bad for authors whose books are expected to become bestsellers.

A federal judge sided with the government last fall and blocked the sale, an outcome cheered by antitrust activists and industry groups. It was a major victory for the Biden administration, which is pursuing an aggressive antitrust strategy.

Penguin Random House stated its intention to appeal the decision, but Paramount chose instead to put Simon & Schuster back up for sale. Because the deal didn’t go through, Penguin Random House had to pay Paramount a $200 million termination fee—a cost on top of the untold millions it had already spent in court. Weeks after the deal fell apart, the CEO of Penguin Random House resigned.

Simon & Schuster, one of the five largest publishers in the United States, remained a very attractive company to buy. It publishes writers like Don DeLillo and Bob Woodward, along with blockbuster writers like Colleen Hoover, and has outperformed the competition even as print sales have stagnated across the industry. In the first quarter of 2023, sales rose 19 percent from a year earlier to $258 million. The financial results of most other major houses were disappointing by comparison.

Selling to HarperCollins could pose a risk to Paramount. HarperCollins, like Simon & Schuster, is also one of the so-called Big Five publishers that dominate the commercial side of the business. A merger could trigger the same consolidation concerns from the government as the deal with Penguin Random House.

But while HarperCollins is the second largest publisher, it is much smaller than Penguin Random House, so the jump in market share would be less drastic and perhaps less worrying for the government.

Accepting an offer from a private equity firm like KKR could allow Paramount to avoid such regulatory challenges.

KKR has a history in the book business. In 2018, it paid about $500 million to acquire RBmedia, an audiobook publisher. KKR said last week that it sold RBmedia to HIG Capital, a Miami-based investment firm, for $1 billion.

Publishing has seen tremendous consolidation in recent years, and many in the industry are concerned about the impact the sale of Simon & Schuster is having on the literary landscape.

Penguin Random House itself is the result of a 2013 merger between Penguin and Random House. After the merger, several other companies also grew. Some antitrust experts predicted that the Justice Department’s success in preventing Penguin Random House from buying Simon & Schuster would put a damper on further consolidation in the industry.

Paramount has sold many of its properties in recent years as it sharpens its focus on video streaming services, including Paramount+ and Pluto TV. The company has said it intends to reinvest some of the money from selling those properties — including Simon & Schuster, tech site CNET and the longtime CBS headquarters in Manhattan known as “Black Rock” — into its subscription streaming business, which is growing fast but still unprofitable.

Alexandra Alter contributed with reporting.

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