Penguin Random House, Simon & Schuster, and S&S parent Paramount Global all confirmed yesterday that the deal under which PRH would buy S&S for about $2.2 billion has ended.
In an 8-K filing with the SEC, Paramount Global said that it had "terminated the purchase agreement in accordance with its terms," which includes a $200 million termination fee that PRH will pay Paramount Global.
The filing noted that S&S "remains a non-core asset to Paramount, as was determined in early 2020 when Paramount conducted a strategic review of its assets. Simon & Schuster is a highly valuable business with a recent record of strong performance, however it is not video-based and therefore does not fit strategically within Paramount's broader portfolio." This was widely interpreted as a way of saying that S&S is on the block again.
Citing "people familiar with the decision," the Financial Times said "Paramount decided to halt the process because of the protracted uncertainty hanging over Simon & Schuster and the limited prospects for securing merger approval through an appeal."
The Financial Times also predicted that selling S&S will be more difficult because of "more challenging market conditions. Simon & Schuster fetched a price far in excess of initial estimates two years ago, in part because Bertelsmann saw clear financial advantages from cementing its position as the world's biggest book publisher."
In a statement, PRH said that it "remains convinced that it is the best home for Simon & Schuster's employees and authors, and together with Bertelsmann, we did everything possible to complete the acquisition. We believe the judge's ruling is wrong and planned to appeal the decision, confident we could make a compelling and persuasive argument to reverse the lower court ruling on appeal. However, we have to accept Paramount's decision not to move forward. We want to thank our Penguin Random House employees and the teams at Simon & Schuster for their support. We wish them the very best in the future, and look forward to continuing to make a positive impact on society through the books we are honored to publish for readers everywhere."
Bertelsmann CEO Thomas Rabe said yesterday that expanding PRH remains "a strategic priority," and that the company is aiming for 5%-10% growth in the book business, both organically and through acquisitions.
In a letter to staff, S&S president and CEO Jonathan Karp said he had no information about what might happen in the near future, adding, "I am grateful for your patience and dedication to our mission during all that has transpired over these many months since the sale began. Ultimately, what matters the most is the work we do together, on behalf of our authors and our books. Over the past three years, we have reached new heights of accomplishment. Simon & Schuster has never been more profitable and valuable than it is today. And that is because of the effort, ingenuity, and perseverance that you bring to our endeavors."
Calling 2022 "one of the single greatest years in our history," Karp continued, "I see numerous reasons to be optimistic about our future. We'll be starting the new year with some tremendously exciting, sure-to-be-bestselling titles, which will be buttressed by the sales of what is currently the bestselling backlist in the publishing industry."
The deal for PRH to buy S&S was announced on November 25, 2020, but the Justice Department filed suit against it in federal district court on November 2, 2021, focusing in particular on the purchase's effect on advances for bestselling authors. After a trial this past summer, on October 31, the court ruled for the Justice Department.