Bertelsmann is in pole position to buy Simon & Schuster, outbidding Rupert Murdoch’s News Corp to strengthen its position as the world’s biggest books publisher.
The German owner of Penguin Random House was the highest bid in a fiercely fought auction for the ViacomCBS publishing arm, which fetched a price far in excess of initial estimates. Two people familiar with the process said Bertelsmann offered more than $2bn.
A person close to Mr Murdoch said the octogenarian media tycoon was not willing to top Bertelsmann as he is convinced the deal will face significant regulatory hurdles, while a deal with News Corp would provide greater certainty of closing.
The acquisition will entrench Bertelsmann’s position as the world’s biggest and most powerful book publisher, with close to a third of the US market by revenues, a share that is more than double its nearest rival.
Simon & Schuster releases about 2,000 titles a year through 50 imprints and publishes literary heavyweights such as F Scott Fitzgerald and Ernest Hemingway. Recent hits include Rage by Bob Woodward and the family memoirs of Mary Trump.
Robert Thomson, the News Corp chief executive, last week warned that a Bertelsmann acquisition would create an anti-competitive “behemoth of books”. News Corp’s HarperCollins, the third biggest publisher in the US, has long sought opportunities to expand its share of the US market.
Thomas Rabe, Bertelsmann chief executive, publicly signalled his interest in buying Simon & Schuster earlier this year and mounted the bid alone, eschewing an option to partner with a private equity group.
Competition authorities rarely block five-to-four mergers and Mr Rabe has said he is confident they would use a broad view of the competitive players in a market that has been transformed by the rise of Amazon and self-publishing.
Simon & Schuster, one of the top five publishers in the US and a prized asset of the late Sumner Redstone, is no longer viewed within ViacomCBS as central to its strategy as the company launches into Hollywood’s streaming battle.
French media group Vivendi, which owns a stake of roughly 27 per cent in the world’s second biggest book publisher Lagardère, is also understood to have bid in the auction. However, the offer made by the French group lagged the other two on the table as of Tuesday afternoon, said one person.
Vivendi, controlled by billionaire Vincent Bolloré, has been negotiating with Lagardère in recent weeks over potentially buying the international business of its book publisher Hachette as part of a broader truce. Vivendi decided that option would be a better fit than bidding up for Simon & Schuster, said the person.
Vivendi declined to comment, while Lagardère could not immediately be reached for comment.