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Updated Aug. 3, 2023
By guest authors Jessica Toonkel, Laura Cooper and Jeffrey A. Trachtenberg from the Wall Street Journal.
Private-equity firm KKR’s talks to acquire Simon & Schuster cap a yearslong effort by Paramount Global to sell the publisher of authors such as Stephen King and Bob Woodward. Photo: Laura Brett/ZUMA Press
Private-equity firm KKR KKR 1.60%increase; green up pointing triangle
is in advanced talks to acquire Simon & Schuster for about $1.65 billion, according to people familiar with the situation, capping a yearslong effort by Paramount Global PARA 3.58%increase; green up pointing triangle
to sell the publisher of such authors as Stephen King and Bob Woodward.
Paramount put Simon & Schuster on the sales block for a second time earlier this year after an earlier sale to Penguin Random House was blocked by a federal judge last year.
Other bidders included HarperCollins Publishers, which like The Wall Street Journal is owned by News Corp, and investor Richard Hurowitz, who was backed by Abu Dhabi-based sovereign-wealth manager Mubadala Investment Co.
Simon & Schuster is nearly a century old, having been founded in 1924. It has been home to authors from Ernest Hemingway and F. Scott Fitzgerald to Jason Reynolds, Anthony Doerr and Walter Isaacson.
The price KKR is discussing with Paramount for the publisher is lower than the $2.2 billion valuation Simon & Schuster drew in the Penguin deal. Paramount received a $200 million termination fee after that deal collapsed and benefited from the earnings Simon & Schuster generated between the last sale attempt, in 2020, and this one.
The publishing house enjoyed a strong year in 2022, with revenue rising 19% to $1.18 billion and operating profit increasing 16% to $248 million.
Star authors such as Colleen Hoover and Stephen King enabled the publisher to flourish on the bestseller list. In the first quarter of 2023, sales at the publishing house rose 19% to $258 million while operating profit increased 16% to $58 million.
Simon & Schuster is the third-largest U.S. book publisher as measured by market share, with an 8% share year-to-date through July 8, according to book tracker Circana BookScan. Penguin Random House is the largest with a 21% share, while HarperCollins Publishers has an 11% market share. The numbers exclude third-party distribution clients.
A sale of Simon & Schuster to a private-equity company, and not another book publisher, might not draw scrutiny from the U.S. Justice Department, according to David Meyer, an antitrust lawyer. “I don’t see a plausible basis for concern but you’d have to look carefully at the portfolio of the acquirer to understand whether there could be issues,” he said.
KKR is an investment firm that manages more than $500 billion in assets across strategies including private equity and credit. The firm is no stranger to the media space and has invested in Axel Springer, the German media conglomerate that owns Politico and Business Insider. It recently agreed to sell audiobook publisher RBmedia to private-equity firm H.I.G. Capital, after owning the business for about five years.
KKR has made a push to give an ownership stake in companies in which it invests to the acquired firms’ employees. In the case of RBmedia, the average payout for its employees will be a minimum of $50,000 at the close of the deal.
Paramount Global put Simon & Schuster up for sale in March 2020, explaining that it would use proceeds from the sale to support its video-streaming efforts.
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That November, Penguin Random House struck its deal to acquire the publisher. The sale was later challenged by the Justice Department on anticompetitive grounds. A federal judge blocked the deal, agreeing with the Justice Department and finding that the deal would restrict competition for new books acquired for advances of at least $250,000.
The new deal comes as print book sales are in decline, following the Covid pandemic. Print book sales through July 8 were down 2.7% to 365.6 million books compared with the same period in 2022, according to Circana BookScan. The publishing industry also faces new threats from generative-AI technology.
Simon & Schuster has been a major player in high-profile political books in the past several years. It has published such titles as former national security adviser John Bolton’s “The Room Where It Happened: A White House Memoir” and a memoir by former President Donald Trump’s niece, Mary L. Trump, called “Too Much and Never Enough: How My Family Created the World’s Most Dangerous Man.”
Last November, Simon & Schuster published former Vice President Mike Pence’s memoir “So Help Me God” despite internal opposition from staffers who objected to some of the former vice president’s political positions.
Paramount also is in the process of trying to sell a majority stake in BET Media Group, which owns cable channels BET and VH-1 and the streaming platform BET+. The company reports second quarter earnings on Monday.
