Why is Paramount selling Simon & Schuster, and how does KKR's potential $1 6 billion deal compare to

Paramount, the current owner of Simon & Schuster, is in negotiations to sell the US book publisher for more than $1.6 billion to KKR. The decision to sell Simon & Schuster comes after last year's regulatory block of a proposed merger between Simon & Schuster and Penguin Random House, which would have resulted in a significant consolidation in the book industry. One of the primary reasons for the potential sale is Paramount's aim to focus on its streaming video business. Paramount owns various assets, including a movie studio and television channels, in addition to Simon & Schuster. The company sees an opportunity to streamline its portfolio and concentrate on the lucrative streaming video sector by divesting the publishing business.Show more

The current bid from KKR at $1.6 billion is lower than the previously agreed-upon $2.2 billion acquisition by Penguin Random House. The collapse of that deal led to Penguin Random House paying Paramount $200 million in termination fees. Given the prior regulatory challenges faced during the attempted merger, Paramount is cautious and is taking regulatory risks into account as it evaluates potential bids for Simon & Schuster. Should KKR secure the deal, they plan to grant stock awards to all of Simon & Schuster's employees, similar to their approach with audiobook publisher RBmedia, which they recently sold to HIG Capital.

Simon & Schuster, known for publishing acclaimed authors such as Edith Wharton and F. Scott Fitzgerald, is a highly regarded publishing house and one of the top five publishers in the US. Despite the disruptions caused by Amazon and the pandemic, the company has demonstrated resilience in the market. In the last year, the publisher's operating income increased by 16% to $248 million, with revenues exceeding $1.1 billion, making it a prized asset in the publishing sector. Overall, the potential acquisition of Simon & Schuster by KKR would determine the fate of the storied publishing company and could significantly impact the landscape of the book industry, given its prominence and historical significance.

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