The New York Times reports that “Penguin Random House’s deal to buy Simon & Schuster, a rival publisher, is close to collapsing after Simon & Schuster’s parent company decided to allow the purchase agreement to expire, according to a person familiar with the decision who spoke anonymously to discuss confidential deliberations.
The deal was already in peril after a federal judge last month blocked the sale from going forward on antitrust grounds. Penguin Random House had said it planned to appeal the decision. But it can only do so if Paramount Global, Simon & Schuster’s parent company, agrees to extend the deal, which expires on Tuesday.
“The collapse of the $2.175 billion sale is a major blow to Penguin Random House’s ambitions to expand its enormous market share, and an enormously expensive one. In addition to the significant legal cost of fighting the Justice Department in court, Penguin Random House will have to pay Paramount a termination fee of about $200 million once the deal falls through.
“Paramount has decided not to proceed with the merger after concluding that it wasn’t worth challenging the Justice Department in court, according to a person familiar with the company’s strategy. Simon & Schuster’s improved financial performance gives Paramount options should it choose to put it back on the market.”
KC’s View:
This is relevant, I think, because in the end it was regulatory pushback on the idea that these two publishing companies should merge, based largely on concerns about reduced competition, that scuttled this deal. The question is whether this is a harbinger of the kind of resistance that Kroger and Albertsons will find to their deal.
I’m sure that the folks at Kroger and Albertsons would argue that their deal is an entirely different animal and actually will be good for competition because it will enable lower consumer prices. But there will be a lot of debate about how “competition” is and should be defined, and I wouldn’t want to place a bet either way at this point.
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