You Can't Tell a Penguin by its Cover

PUBLISHED: Oct 29 2012 @ 04:00 | Comments (0) | More info about Lou Gutheil

Last week the publishing industry was all a dither over the possibility that Pearson PLC (LSE:PSON) was in discussions with Germany’s Bertelsmann regarding mating its Penguin Books division with Bertelsmann’s Random House division. Analysts were generally viewing the potential merger with as a boon for investors, generally seeing the combining of two of the five major publishing icons as being favourable to the bottom line. The share price of Pearson was up 9 pence from 1,212 to 1,221 on Friday, October 26th. The share price has struggled the second half of October dropping 50 pence between 16 October and 23 October. The upturn since the 23rd may be an indication that the analysts were right.

Things have changed over the weekend, however, as News Corp has announced that it is interested in acquiring Penguin and mating it with its book publishing division, Harper Collins. While details are still sketchy early Monday morning, it is believed that Rupert Murdoch’s group will tender an offer in the area of £1.0 billion, conditional on proper due diligence.

Mr. Murdoch may have to post a tweet to warn the plethora of twits (Isn’t that what they are on Twitter?) who have been trying to figure out what the new name of a Random House Penguin would be. Now it appears that it they may have to paint the nursery blue instead of pink.

Both Bertelsmann’s and News Corp’s strategic plans are to split their entertainment and publishing arms into separate entities. The winner of the overture for Penguin would be in a much stronger position in their publishing division by the combination – whichever it is – of two of the top five publishers in the world. Nonetheless the companies are looking at different overall strategies with Bertelsmann wanting to broaden its publishing base to be less Europe-dependent whilst News Corp would use the synergies to boost its educational division.

All we know for sure at this point is that Penguins mate for life, so we can look forward to a long-term relationship. I didn’t even know it was Penguin mating season.

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