Paramount Sells Simon & Schuster to Private-Equity Firm KKR in Major Publishing Industry Shake-Up
Paramount announced on Monday that it has reached a deal to sell Simon & Schuster, one of the largest and most prestigious publishing houses in the United States, to private-equity firm KKR. This deal, worth $1.62 billion, marks a significant changing of the guard in the books business, placing control of the iconic publishing company in the hands of a financial buyer with a growing presence in the industry.
While private equity investors have previously made their mark in the book business through ownership of literary agencies, publishing houses, and retailers like Barnes & Noble, this acquisition of one of the country’s largest publishers further solidifies the influence of financial interests in the industry.
Richard Sarnoff, who leads KKR’s media, entertainment, and technology group, is a well-known figure in the publishing industry and has earned praise from several publishing executives. His involvement is seen as encouraging, given his past experience with Bertelsmann, the parent company of Penguin Random House, and his role as chairman of the Association of American Publishers.
Joining Sarnoff is Ted Oberwager, a board member of RBMedia and Skydance Media. Oberwager’s involvement adds another layer of expertise to the deal, considering his ties to RBMedia, an audiobook company, and Skydance Media, which collaborated with Paramount Pictures on the blockbuster film “Top Gun: Maverick.”
Peter Osnos, a veteran publishing executive, expressed optimism about the sale, stating, “A great publishing company will be owned by people who will want to respect it.” The fate of Simon & Schuster has been a cause for concern within the industry since it was put up for sale in 2020.
Potential buyers included other publishers, which would bring their understanding of the book business but also lead to further consolidation and potential job cuts. However, a sale to Penguin Random House was thwarted by government antitrust concerns, highlighting the potential regulatory challenges involved in such transactions.
The involvement of private equity introduces its own set of risks, with increasing scrutiny on short-term gains at the expense of long-term sustainability. Private equity firms typically don’t hold onto their purchases for extended periods, indicating the possibility of a future sale or initial public offering for Simon & Schuster.
As part of the deal, Simon & Schuster employees will receive an ownership stake in the company, a move aimed at bolstering employee engagement. KKR has implemented a similar program with RBMedia, which it acquired in 2018 and subsequently sold to another investment firm. Long-term employees of RBMedia received a cash payout worth up to two times their salary from the sale.
KKR has prior experience in the books business, having invested in Overdrive, a digital reading platform used in libraries and schools. Some of KKR’s previous investments, such as RBMedia, have proven successful, with the size of RBMedia’s audiobook catalog doubling under KKR’s ownership.
The road to this announcement has been tumultuous, with Paramount’s initial agreement to sell Simon & Schuster to Penguin Random House being challenged by the Biden administration and ultimately blocked by a judge. Paramount’s decision to put Simon & Schuster back on the market resulted in Penguin Random House paying a $200 million termination fee, along with substantial legal costs.
KKR’s offer for the publisher may be lower than Penguin Random House’s, but it takes into account the termination fee paid to Paramount and the publisher’s earnings during the intervening years. The choice to sell to KKR is seen as a way to avoid further regulatory complications.
Erik Gordon, a professor at the University of Michigan Ross School of Business, commented, “Paramount doesn’t want to traipse through another deal that goes bust. It wants to sell the business without more surprises.”
The sale of Simon & Schuster to KKR marks a significant shift in the publishing industry and raises questions about the future landscape of the book business. Authors, industry professionals, and readers alike will be closely watching how this major deal unfolds and its implications for the literary world.