Bertelsmann to Pay $1B to Boost Stake in 'Fifty Shades,' 'Game of Thrones' Publisher

Courtesy of HBO
George R. R. Martin's 'Game of Thrones' novels are among the publisher's biggest sellers.

The German firm will now own 75 percent of book giant Penguin Random House in the deal with British media group Pearson.

German media group Bertelsmann has signed a $1 billion deal to increase its stake in publishing group Penguin Random House by a further 22 percent, giving Bertelsmann a 75 percent share of the book giant behind the Fifty Shades of Grey and Game of Thrones series.

British media firm Pearson, the other shareholder in the publishing group, will retain a 25 percent stake in Penguin Random House following the deal, which is expected to close in September, pending regulatory approval.

Penguin Random House was created in 2013 by the merger of the British and American book giants.

The deal, unveiled Tuesday, puts an enterprise value of $3.55 billion on the publishing company. Pearson is set to net some $1 billion from the sale, 300 million pounds ($382.5 million) of which it will use for a share buyback program.

Following closing, Pearson will have a 18-month lockup on the sale of its remaining 25 percent stake, with Bertelsmann having first rights to make an offer should the company choose to sell.

The price tag was on the low end of expectations, suggesting, according to London-based Liberum Capital analyst Ian Whittaker, that Bertelsmann "has had the upper hand in negotiations." 

Bertelsmann CFO Bernd Hirsch suggested as much, noting that "our good operating performance and the current low-interest environment offer us ideal conditions for financing the transaction at exceedingly favorable terms."

Bertelsmann CEO Thomas Rabe said the deal fit with the German company's strategy of looking to hold strategic majorities in all of its content production companies. Bertelsmann holds a 75 percent stake in RTL Group, the TV company that controls FremantleMedia, and has full control over magazine publisher Gruner + Jahr and music label BMG.

Markus Dohle, a Bertelsmann exec, will remain CEO of Penguin Random House, a position he has held since the company was formed in 2013. With its new three-quarters stake, Bertelsmann will also be able to appoint the chairman of the publishing group's board of directors.

Penguin Random House is made up of some 250 individual publishers across five continents. The company publishes more than 15,000 new books every year, and its stable of authors includes best-selling machines such as John Grisham and Dan Brown as well as Noble Prize-winning writer Alice Munro and former President and First Lady of the United States Barack and Michelle Obama.