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| Version 1 | Version 2 |
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| Penguin chief: News Corp can't derail Random House deal | Penguin chief: News Corp can't derail Random House deal |
| (35 minutes later) | |
| Penguin's chief executive has ruled out accepting a counterbid from Rupert Murdoch's News Corporation, which owns rival publisher HarperCollins, saying that its venture with Bertelsmann's Random House is a done deal. | Penguin's chief executive has ruled out accepting a counterbid from Rupert Murdoch's News Corporation, which owns rival publisher HarperCollins, saying that its venture with Bertelsmann's Random House is a done deal. |
| Murdoch is understood to have made a "very general approach" to Pearson when the deal with Bertelsmann was already close to being signed. | |
| However, Pearson is understood to have believed an offer from News Corporation to buy Penguin outright would not have been financially viable. | |
| John Makinson, who will take the role of executive chairman of the board of the new Penguin Random House, dismissed the chances of News Corp derailing the deal by making a cash offer for Penguin. | John Makinson, who will take the role of executive chairman of the board of the new Penguin Random House, dismissed the chances of News Corp derailing the deal by making a cash offer for Penguin. |
| "There isn't any sort of break clause [with Bertelsmann]," he said. "It is a signed transaction." The Penguin chief said that the board of Pearson had "exhaustively examined" all options for the business before settling on the Bertelsmann deal. | "There isn't any sort of break clause [with Bertelsmann]," he said. "It is a signed transaction." The Penguin chief said that the board of Pearson had "exhaustively examined" all options for the business before settling on the Bertelsmann deal. |
| He did not directly deny the question of whether this process included having previously held talks with News Corp or HarperCollins. "I'm not talking too much about that," he said. "I don't think we should talk about that, that should be something you ask Pearson." | He did not directly deny the question of whether this process included having previously held talks with News Corp or HarperCollins. "I'm not talking too much about that," he said. "I don't think we should talk about that, that should be something you ask Pearson." |
| About two-thirds of Penguin's business is in the US, meaning any deal with News Corp would have triggered huge capital gains tax liabilities. | |
| This means that Murdoch, or any bidder looking to buy Penguin outright, would have had to have paid an extremely price to make it worthwhile for Pearson – significantly over £1bn. | |
| It is not now possible for Murdoch to derail the Bertelsmann deal with a blockbuster offer to shareholders, as the joint venture plan does not require approval by Pearson investors. | |
| The deal does not qualify as a class one transaction according to UK listing authority rules on tests relating to market capitalisation and profits. | |
| Makinson dismissed concerns that creating a global book powerhouse – Penguin Random House will have combined revenues of £2.4bn – will threaten the independent publishers and vibrancy in the book market. | |
| "There will be a high degree of separation and autonomy and continuity in the [existing] editorial structures of the two companies," he said. "From the perspective of a reader, author or agent there won't be very much change in the day-to-day operations of the companies." | |
| He also said the strategy behind the deal was not to take an axe to the editorial side of the business, but that there could be savings to be had in the back office. | |
| "This is not consolidation being driven by financial cost arithmetic," he said. "In the back end sure, a lot of savings can be achieved in procurement and technology investment." | |
| He said that the deal was driven by a need to successfully transform the Penguin and Random House businesses to a world of ebooks, and maintain strength in the face of ever-strengthening online players such as Amazon. | |
| "We are all worried as the world moves to a more digital structure for content and distribution, that publishing could diminish, fewer books be published and fewer risks taken," he said. "We hope to be able to offer more to readers and authors. This [deal] will give us resources, capacity and confidence to publish a broad array [of content] and to take risks, that is what good publishing is about." | |
| Makinson said he expected to spend more time in New York, where he says he believes the headquarters of the new venture will be based, as well as London. | |
| Random House's Markus Dohle has been appointed a chairman and chief executive of the new venture, with Bertelsmann holding five board seats, Pearson four. | |
| Makinson said that the decision to strike a deal with Bertelsmann – talks started five months ago – was undertaken with the unanimous backing of the Pearson board. | Makinson said that the decision to strike a deal with Bertelsmann – talks started five months ago – was undertaken with the unanimous backing of the Pearson board. |
| "It has been a very thorough process," he said. "The board of Pearson examined [every option] exhaustively. There was a great deal of analysis of all options available to Penguin. We looked at selling, merging, buying, running it differently within Pearson. We concluded this was the best option for Pearson's shareholders and the publishing industry." | "It has been a very thorough process," he said. "The board of Pearson examined [every option] exhaustively. There was a great deal of analysis of all options available to Penguin. We looked at selling, merging, buying, running it differently within Pearson. We concluded this was the best option for Pearson's shareholders and the publishing industry." |
| Makinson dismissed the view of some analysts that Penguin Random House is likely to run into regulatory issues. "I don't think our combined market share will trigger the need for disposals – 30% is an important number," he said, referring to the acceptable market share bar set by Universal Music's takeover of EMI. | Makinson dismissed the view of some analysts that Penguin Random House is likely to run into regulatory issues. "I don't think our combined market share will trigger the need for disposals – 30% is an important number," he said, referring to the acceptable market share bar set by Universal Music's takeover of EMI. |
| "We don't expect to be north of 30%," he added. "In the round we expect to meet the regulatory criteria." He said that in a few "small discrete markets" there may be a need to "have a discussion". However, his legal advice indicates no need for significant disposals in major markets, he added. | "We don't expect to be north of 30%," he added. "In the round we expect to meet the regulatory criteria." He said that in a few "small discrete markets" there may be a need to "have a discussion". However, his legal advice indicates no need for significant disposals in major markets, he added. |
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