Simon & Schuster sold for $1.6 billion to KKR.

Simon & Schuster sold for $1.6 billion to KKR.

Paramount Global’s Purchase of Simon & Schuster: A New Chapter for the Storied Publishing House

Paramount Global

In an exciting development for the publishing industry, the private equity giant, Paramount Global, has announced its acquisition of Simon & Schuster for a substantial $1.62 billion in cash. The deal, subject to government approval, brings the iconic publishing house under the umbrella of Paramount Global, while allowing Simon & Schuster to operate independently, preserving its legacy and unique culture.

Simon & Schuster, one of New York’s prestigious “Big Five” publishing firms, boasts an impressive roster of authors, including literary heavyweights such as Stephen King, Colleen Hoover, and Bob Woodward. With best-sellers consistently gracing the shelves, Simon & Schuster has managed to thrive even as the book market has faced challenges. The publisher’s upcoming releases, such as Britney Spears’ memoir “The Woman In Me” and Walter Isaacson’s biography of Elon Musk, have generated significant buzz and anticipation.

Under the leadership of CEO Jonathan Karp, Simon & Schuster welcomes this new chapter with enthusiasm. Karp expressed his delight, confident that the collaboration with Paramount Global, specifically with the support of KKR, their parent company, will enable Simon & Schuster to reach even greater heights. The partnership provides a welcome boost for Paramount Global, which reported a loss of $424 million for the three-month period leading up to June 30. The sale proceeds from the acquisition will be used to alleviate debt.

Richard Sarnoff, Chair of Media at KKR, praised Simon & Schuster as an efficient and well-run organization and assured that the publisher’s editorial independence will be preserved. Sarnoff, formerly associated with Penguin Random House’s parent company, Bertelsmann, firmly stated that KKR does not intend to interfere with the publishing decisions of Simon & Schuster. This commitment to maintaining a 99-year legacy of editorial independence resonated with industry insiders and offered reassurance amidst concerns surrounding potential changes.

Additionally, Sarnoff revealed that KKR has a track record of providing equity to employees of companies it acquires. This practice, relatively uncommon in the book publishing industry, sets Simon & Schuster apart, offering its employees a unique opportunity. Within an industry where starting salaries average around $45,000-$50,000, the prospect of an equity stake presents a significant financial advantage. Such an arrangement has the potential to be worth half, or even more, of an employee’s annual pay, thereby addressing the growing dissatisfaction regarding the cost of living in expensive cities like New York. This move demonstrates KKR’s commitment to supporting and expanding Simon & Schuster, fostering a positive and competitive environment for its workforce.

With regards to the future of their ownership, Sarnoff noted that KKR does not have a predetermined timeline for their stewardship of Simon & Schuster. However, the typical range for their investments is around five to seven years. Such tenure allows ample time to nurture growth and cultivate success before potentially reassessing strategic options.

Simon & Schuster’s impending acquisition by Paramount Global comes following a failed attempt at a merger with Penguin Random House. In 2020, Paramount had initially struck a deal to sell Simon & Schuster to Penguin Random House for a whopping $2.2 billion. However, due to mounting concerns of consolidation and potential harm to competition, the Department of Justice (DOJ) under the Biden administration intervened and filed a lawsuit to block the merger. U.S. District Judge Florence Y. Pan subsequently ruled in favor of the DOJ, citing concerns over substantial harm to market competition.

Paramount Global chose not to appeal the decision and instead shifted its focus to finding an alternative buyer for Simon & Schuster. With the company’s centennial approaching next year, this change in ownership presents an opportunity for a fresh start while honoring the publisher’s rich history. Founded in 1924 by Richard Simon and Max Schuster, Simon & Schuster has experienced multiple ownership changes throughout its existence, culminating in its acquisition by Gulf+Western in 1975. The decision by Paramount to sell the publisher reflects a strategic shift towards video entertainment as they prioritize their core business interests.

As Simon & Schuster embarks on an exciting new phase of its journey, the publishing industry eagerly anticipates the collaboration with Paramount Global and the opportunities it will bring. The acquisition ensures stability for Simon & Schuster while opening doors for potential growth and international expansion. With talented authors, a rich literary heritage, and an unwavering commitment to editorial independence, Simon & Schuster is poised to continue its legacy as a leading player in the fiercely competitive publishing world.

Article is for informative purposes only. Images used with permission from Fortune.