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The US Department of Justice has given its seal of approval to the proposed merger between Random House and Penguin.
“This positive first decision by one of the antitrust authorities is an important milestone on the path to uniting two of the world’s leading publishing companies into a truly global publishing group,” said Thomas Rabe, CEO of Bertelsmann AG (the German parent company of Random House). “It will enable investments worldwide in new digital publishing models, in new distribution paths, products, and services, and in the major growth markets.”
Bertelsmann and Penguin’s British parent company, Pearson PLC, announced their plans to merge last year. At the time, Rupert Murdoch’s News Corp was said to be eyeing Penguin for possible purchase in order to bolster their publishing arm (News Corp already owns HarperCollins).
The merger between Random House and Penguin will create the largest publishing house the world has ever known. The new company will be called ‘Penguin Random House,’ and Bertelsmann will control 53 percent of it, while Pearson will control the other 47 percent.
Estimates of Penguin Random House’s projected market share vary widely. When the merger was first announced, it was reported that the new company would control 30 percent of the trade-book market. Now, the media seem to suggest that the figure will be closer to 25 percent. However, if the market share is examined by genre, Penguin Random House’s clout might be much greater. For example, Dennis Johnson over at the independent publisher Melville House suggests that the new conglomerate might end up controlling 50 percent of the literary fiction market.
No doubt Pearson and Bertelsmann are hoping that, by tying the knot, they will be able to strengthen their hand when negotiating with digital companies like Amazon, Google, and Apple. Amazon alone controls a whopping 60 percent of the online book market thanks in large part to its now-ubiquitous Kindle family of e-readers.
Despite the Justice Department’s approval, the merger still faces potential obstacles in Europe. The European Commission still needs to evaluate the deal, and analysts note that it tends to evaluate culture-related mergers with particular care. When Universal Music Group purchased the recorded music division of EMI last year, European Union regulators forced Universal to sell off a large chunk of EMI’s assets, including most of the lucrative Parlophone label. Will Bertelsmann and Pearson be forced to make similar concessions?