Four top international law firms have scored lead roles on the merger between book publishers Penguin and Random House–a deal that would create the world’s largest consumer publishing organization, with a reported value of $3.8 billion (£2.4 billion).
The agreement, which was announced Monday, calls for Penguin and Random House to combine their businesses in a newly created joint venture named Penguin Random House. German multinational media company Bertelsmann SE & Co. KGaA, which owns Random House, will control 53 percent of the joint venture, while U.S.–based Pearson plc, which owns Penguin, will control the remaining 47 percent. The joint venture will not include Bertelsmann’s trade publishing business in Germany, and Pearson will retain rights to use the Penguin brand in educational markets worldwide.
The terms of the transaction—which is scheduled to close in the second half of 2013, pending regulatory approval—also require that neither Pearson nor Bertelsmann sell any of their holdings in Penguin Random House for three years.
In a press release announcing the deal, Pearson chief executive Marjorie Scardino said the merger will “greatly enhance” the company’s fortunes by providing greater resources to be invested in content, new digital publishing models, and high-growth emerging markets. The combined organization will generate synergies from shared resources such as warehousing, distribution, printing and central functions, the release added, while its combined level of “organic investment” in authors and new product models will exceed the total of Penguin and Random House as independent publishing houses.
In 2011, Random House reported revenues of $2.2 billion (€1.7 billion) and operating profit of $239 million (€185 million). Penguin, meanwhile, reported revenues of $1.6 billion (£1 billion) and operating profit of $178 million (£111 million). (As The Am Law Daily has reported, Pearson found itself in the Pentagon’s crosshairs in August when its Dutton Penguin imprint published No Easy Day, an inside account of the mission to kill Osama bin Laden by former Navy SEAL Mark Bissonette. Defense Department general counsel Jeh Johnson, a former Paul, Weiss, Rifkind, Wharton & Garrison partner, indicated Bissonette had violated a non-disclosure agreement by penning the controversial book. Lawyers for both the author and the publisher denied the accusation.)
Bertelsmann is represented in the deal by Slaughter and May in the United Kingdom and Davis Polk & Wardwell in the United States. For its part, Pearson turned to Freshfields Bruckhaus Deringer and Morgan, Lewis & Bockius.
The Slaughter and May team is led by Charles Randell and includes Randell’s fellow corporate partner Craig Cleaver, competition partners Philippe Chappatte and John Boyce, IP partner David Ives, pensions and employment partner Sandeep Maudgil, and tax partner Tony Beare.
The Davis Polk corporate team advising Bertelsmann includes partners Christopher Mayer and Michael Davis, partner Harry Ballan (tax matters), partner Kyoko Takahashi Lin (employee benefits), and partner Frank Azzopardi (intellectual property).
The Freshfields team acting as counel to Pearson is led by corporate partners Simon Marchant and Oliver Lazenby, supported by IP partner Chris Forsyth and counsel Jill Delaney.
The Morgan Lewis team adving Pearson on the matter is being led by corporate partners Benjamin Wills and Charles Engros, Jr., and also included IP partner Ron Dreben, antitrust partner Harry Robins, tax partner Richard Zarin, employee benefits partner Gary Rothstein, and commercial partner Vito Petretti. The Random House–Penguin merger is the second media-related deal on which Engros has taken a lead role this month. As The Am Law Daily previously reported, he and a team of Morgan Lewis lawyers advised Reed Elsevier Group on its $25 million sale of Hollywood trade publication Variety to Penske Media Group, the latest in a series of transactions the firm has handled for the company in recent months.