ViacomCBS to Sell Simon & Schuster to Penguin Random House for More Than $2 Billion

ViacomCBS CEO Bob Bakish
Jesse Grant/Getty Images

ViacomCBS CEO Bob Bakish

Wall Street analysts earlier estimated the book unit could fetch $1.2 billion to $1.5 billion after CEO Bob Bakish said in March it was "not a core asset" and up for sale.

ViacomCBS said Wednesday that it has agreed to sell its book unit Simon & Schuster to Bertelsmann's Penguin Random House for $2.175 billion in cash.

The merged company, created by the December recombination of Viacom and CBS Corp., previously sold CBS digital unit CNET for $500 million and will now divest the book division that CBS brought to the table in the merger.

Proceeds from the divesture, expected to close next year after regulatory approvals, will be used to invest in ViacomCBS’s "strategic growth priorities, including in streaming, as well as to fund the dividend and pay down debt." The company plans to beef up and rebrand streaming service CBS All Access under the name Paramount+ next year.

ViacomCBS said on Wednesday that the "highly competitive auction" for the book unit had attracted "interest from buyers around the world."

Upon close, Simon & Schuster, whose portfolio of authors includes Stephen King, Doris Kearns Goodwin, and Jason Reynolds, will continue to be managed as a separate unit under the Penguin Random House umbrella, with president and CEO Jonathan Karp and COO and CFO Dennis Eulau set to continue at its helm.

LionTree Advisors is acting as the exclusive financial advisor to ViacomCBS on the deal, with Shearman & Sterling serving as legal advisor.

Final bids for book unit Simon & Schuster were due recently. ViacomCBS CEO Bob Bakish had unveiled in March that the publishing unit was on the auction block. "We've made the determination that Simon & Schuster is not a core asset of the company," he said back then. "It is not video-based; it doesn't have significant connectivity to our broader business. At the same time, there's no question it's a marquee asset that's highly valuable. I've had multiple, unsolicited inbound calls about that asset."

Analysts at the time estimated the book unit could fetch $1.2 billion to $1.5 billion. Guggenheim Securities analyst Michael Morris back then pegged the valuation of Simon & Schuster at $1.5 billion, "based on about $150 million in estimated 2020 earnings before interest, taxes, depreciation and amortization and a 10 times valuation multiple."

Recent reports suggested the sale could reach a price target of $1.7 billion-plus though, with suitors including HarperCollins owner News Corp and Penguin Random House owner Bertelsmann. A source previously told THR that interest in the asset had been "robust."

News Corp CEO Robert Thomson said in a reaction: "There is clearly no market logic to a bid of that size – only anti-market logic. Bertelsmann is not just buying a book publisher, but buying market dominance as a book behemoth."

He added: "Distributors, retailers, authors, and readers would be paying for this proposed deal for a very long time to come. This literary leviathan would have 70 percent of the U.S. literary and general fiction market. There will certainly be legal books written about this deal, though I wonder if Bertelsmann would publish them."