Murdoch Media battles PE-firm for publisher Simon & Schuster: $1.7bn bidding floor

Rupert Murdoch’s News Corp will this week vie with German media group Bertelsmann to buy Simon & Schuster in an auction that has become a battle for scale between two of the world’s biggest book publishers.

ViacomCBS is expecting final bids for its Simon & Schuster publishing arm this week, according to people familiar with the process, with a floor for offers set at $1.7bn, significantly in excess of initial estimates.

Interest from trade bidders including News Corp, the owner of HarperCollins, and Bertelsmann’s Penguin Random House, the world’s biggest publisher, appears to have priced out potential financial buyers and private equity, according to the people.

French media group Vivendi is still weighing a potential bid but such an offer is complicated by its battle for control of Lagardère, the owner of publishing imprint Hachette. Vivendi’s billionaire owner, Vincent Bolloré, remains keen to expand in publishing but does not want to be drawn into a bidding war, said a person familiar with his thinking. Vivendi declined to comment.

Vivendi, which owns a roughly 27 per cent stake in Lagardère, has discussed taking over the international publishing assets of Hachette as part of a negotiation with embattled chief executive Arnaud Lagardère. If combined with Simon & Schuster, Vivendi would become a serious player in global publishing.

Lagardère itself had publicly declared an interest in bidding for Simon & Schuster in July but declined to comment in early November when analysts asked if it still intended to do so. The company is saddled with high debt and its business has been hit hard by the pandemic, making it difficult for it to do a takeover of Simon & Schuster’s size.

One person involved in the auction described a potential Lagardère bid as a long shot, while another said the group had already pulled out from the auction. Lagardère did not immediately respond to a request for comment.

Simon & Schuster is one of the top five publishers in the US, a prized asset in a mature and increasingly concentrated sector that has shown some resilience to the disruption from Amazon and the pandemic.

The publishing house was home to authors including Ernest Hemingway and F Scott Fitzgerald and still publishes about 2,000 titles a year, recently releasing Rage by Bob Woodward and the family memoirs of Mary Trump.

Thomas Rabe, Bertelsmann’s chief executive and chairman, told the Financial Times in September that he was interested in buying Simon & Schuster and the German group is expected to bid this week, potentially partnering with private equity group Atairos.

Such a deal would dramatically strengthen Bertelsmann’s pre-eminent position in the sector, increasing its market share in the US by revenue from a quarter to more than a third.

Mr Murdoch’s HarperCollins, which has long sought buying opportunities and acquired women’s fiction publisher Harlequin in 2014, is also preparing a final bid, according to a person with knowledge of the situation. It is the world’s third-biggest publisher and holds slightly more than a tenth of the US market.

Its entry into the race for Simon & Schuster was first reported by Publisher’s Weekly. The New York Times reported bids could exceed $1.7bn.

One potential consideration for ViacomCBS is whether a sale to Bertelsmann might prompt an antitrust suit in the US, which would draw out the transaction and delay its ability to deploy the sale proceeds in other parts of its business.

Mr Rabe told the FT he was relaxed about potential antitrust issues because regulators will take a “holistic” view of the market, which will recognise the growth of self-publishing and the market power of Amazon.

But industry executives have grown alarmed by the unrivalled clout Bertelsmann would attain through buying Simon & Schuster. One rival estimated the combined group would hold US market share of more than 50 per cent for hardcover fiction titles, and significantly higher for literary fiction — examples of subsectors that antitrust regulators traditionally look at in analysing whether the deal would hurt competition.

Bertelsmann declined to comment on details of the sale process but said: “We have stated in the past that Penguin Random House wants to grow organically and through M&A. This is still the case.”

Source: Financial Times