Merger talks for historic publishers

PEARSON revealed yesterday it is in talks with German media powerhouse Bertelsmann to merge its book publishing arm Penguin with Bertelsmann’s Random House.

A deal would see a combined company worth around £2bn, with Pearson likely to own a minority share. The merger would also create a company with greater clout when negotiating with technology giants such as Amazon and Apple over ebook royalties.

The FTSE 100 firm, which also owns the Financial Times, said: “Pearson confirms that it is discussing with Bertelsmann a possible combination of Penguin and Random House. The two companies have not reached agreement and there is no certainty that the discussions will lead to a transaction.” Bertelsmann did not comment.

Analysts warned that the deal could create competition worries, as the joint firm would control more than a quarter of book sales in some markets.

“The regulatory issues would not be impossible to overcome but there might be some problems,” Ian Whittaker, a media analyst at Liberum Capital, said, pointing out that Penguin is currently embroiled in a dispute with the US department of justice over fixing ebook prices.