Writers Tricks of the Trade VOLUME 7, ISSUE 3 | Page 33

I NDUSTRY N EWS (C ONT ’ D ) Executives at Bertelsmann said that the deal wouldn't affect Penguin Random House's daily operations, but Bertelsmann's increased control will give it the right to name a chairman of the publisher's board of directors. "The decision-making powers have of course shifted in our favor," Bertelsmann CEO Thom- as Rabe said in an internal document sent to employees. According to Mr. Rabe, the deal was an attractive financially and strategically, boosting Ber- telsmann's earnings by more than EUR60 million and giving it a higher stake in the book busi- ness which has high growth potential in China, India and Brazil. Under the terms of Bertelsmann and Pearson's joint-venture agreement, the German com- pany already had control of the CEO job, to which it appointed Mr. Dohle, a Bertelsmann loyal- ist who has been with the company for 23 years and ran Random House before the merger. Originally Bertelsmann had just 53% of the Penguin Random House, the joint venture with headquarters in New York. The increased stake comes after Bertelsmann this winter announced it was targeting EUR20 billion in revenue by around 2020, with 30% coming from the U.S. The sale is expected to close in September, Pearson and Bertelsmann said, pending approv- al from regulators, including at the European Commission, according to a Bertelsmann spokes- man. Penguin Random House's enterprise value for the deal had been set at $3.55 billion, accord- ing to Bertelsmann, which was advised by J.P. Morgan in the transaction. In preparation for the deal in the last weeks, Bertelsmann issued a EUR500 million bond, allowing the company to de- ploy existing liquidity in the purchase, according to the company's spokesman. Bertelsmann Chief Financial Officers Bernd Hirsch said it had financed the acquisition at "exceedingly favorable terms." The 2013 merger of Penguin and Random House joined 250 brands that publish more than 15,000 titles annually. Mr. Rabe from Bertelsmann called the publisher "The world's largest and most international trade book publishing group." Penguin Random House's stable of writers include Dan Brown, John Grisham, Ken Follett, George R.R. Martin, John Green and Paula Hawkins. Earlier this year, the house turned heads by signing a two-book deal with Barack and Michelle Obama that Bertelsmann called the highest advance ever paid in the history of book publishing. Bertelsmann competes with News Corp, which owns book publisher HarperCollins, as well as Dow Jones & Co., the publisher of The Wall Street Journal. In January Pearson issued an exit notice that its 47% stake could be up for sale. Pearson was facing falling revenues from its North American higher-education business and told investors it was looking to shore up its balance sheet. Olga Cotaga contributed to this article. Write to Zeke Turner at [email protected] S UMMER 2017 P AGE 26 W RITERS ’ T RICKS OF THE TRADE