Private equity firms are mulling approaches for Penguin, Simon & Schuster and HarperCollins, people familiar with the situation said, as the cash-rich financiers expand their voracious appetite for the media sector.
Acquiring a publisher of best-selling novels and biographies would be a departure for private equity, which has traditionally focused on other media, and mainly on educational and scientific specialties where book publishing is concerned.
Although they are notorious for their snail's pace growth and tight margins, general interest publishers generate a reliable stream of steady cashflow from their back-catalogue titles, an attractive element for potential bidders.
The plans are at an early stage, the sources cautioned, and might not lead to any formal offers. Several firms already have made overtures to Penguin's parent company, Pearson Plc , to ask whether the iconic pioneer of the mass-market paperback might be put up for sale, according to two of the sources.
General interest book publishers typically sell for about one times revenue, which would value Penguin at around 800 million pounds ($1.53 billion).
The suitors include Cinven, Candover and Permira, according to one of the sources. "People have asked, 'Is it for sale?' The answer is officially 'No,' unofficially 'Not quite yet,'" said the source, who requested anonymity. "They are quietly biding their time."
Any decision about selling Penguin would need to overcome the reluctance of Pearson Chief Executive Marjorie Scardino, who has repeatedly argued that the company's three divisions -- education, books and newspapers -- fit together. "On a scale of one to 10, with one being 'over my dead body,' and 10 being the start of an auction, the internal deliberations have reached about a five or a six," one source said.
Pearson declined to comment about whether it had received any approaches. "The board has a rolling review of all of our businesses, and those discussions belong in the boardroom," a spokesman said. "Penguin is making very good progress with continued strong publishing performance and efficiency gains, often in collaboration with our education business."
Banking sources also say private equity firms continue to contemplate buying out Pearson in its entirety, but no serious approaches have yet been made. Interest in CBS's Simon & Schuster and News Corp.'s HarperCollins is less developed, but sources say they are being more closely scrutinised than in the past.
The Reuter's report has more details.
The Bookseller has John Makinson, CEO of Penguin, responding to suggestions of Penguin being up for sale and making a strong case for syngeries between Penguin and its parent Pearson.
Penguin c.e.o. John Makinson has rebutted analyst claims that there are "limited synergies" between Penguin and Pearson's education business, and that Penguin is a "drag on group growth". The points were made following Pearson's results for the nine months to 30th September, which showed 6% sales growth at Pearson Education compared with 2% at Penguin worldwide.
Makinson said Penguin's UK division grew by more than 2% over the period, with strong performances from Penguin Press and Puffin. "Now is the time of year that Penguin General takes up the reins," he continued. "Our commercial publishing is led by Jamie Oliver but it's also quite significantly deeper than it was this time last year. But it is a very much more crowded and competitive market than it was a year ago."
He added that synergies between Penguin and Pearson are "extensive". "Being part of the largest book company in the world is quite attractive when it comes to negotiating print contracts and supply agreements. In this country education and Penguin are quite extensively integrated, as they are in Australia, New Zealand, Canada and India. To pull them apart would be no easy matter.