Paramount is preparing to announce an agreement to sell Simon & Schuster, one of the country’s top publishers, to KKR, a private-equity firm, marking the end of a yearslong attempt to sell the publishing house.
The deal, which values Simon & Schuster at roughly $1.62 billion, could be announced as soon as Monday, according to three people familiar with the deal who spoke on condition of anonymity on Sunday to discuss a confidential process. The deal is not yet final and could still fall apart, cautioned one of the people. Paramount reports earnings on Monday, and investors will be expecting an update on the company’s efforts to offload the publisher.
The deal has the potential to reshape book publishing, an industry in which Simon & Schuster is one of the most significant players in the country. It also may offer closure to employees and industry observers, who have watched anxiously for years as the publisher has looked for a new owner.
Paramount (formerly ViacomCBS) put Simon & Schuster up for sale in 2020. About nine months later, it announced a deal to sell the company to Penguin Random House for $2.18 billion. The news of the planned sale came after years of significant mergers in publishing, with large houses joining together or gobbling up small and medium-size competitors, and the deal was widely expected to be approved by regulators.
The Biden administration, however, challenged the deal on antitrust grounds, concerned, among other things, about the impact on some authors. Penguin Random House is already by far the largest publisher in the country. Last year, a judge sided with the government and blocked the merger. Penguin Random House was then required to pay Paramount a $200 million termination fee, in addition to the millions it spent on legal fees.
The possibility that a private equity firm could buy Simon & Schuster has made some publishing executives nervous over the past three years, concerned it could lead to staff cuts and fewer book titles.
Still, private equity is not new to the book industry. KKR acquired OverDrive, a digital reading platform for libraries and schools in 2020. Last month, KKR said it planned to sell RBmedia, the audiobook publisher it bought in 2018, to H.I.G. Capital, a Miami-based investment firm, for more than $1 billion. The investment firm Elliott Advisors bought Barnes & Noble in 2019, and has presided over its resurgence.
Another bidder that had been in the running was HarperCollins, which is owned by News Corp. and is the second-largest publisher in the country. Striking a deal with another large publisher could have left Paramount facing regulatory challenges again, even though the combination of HarperCollins and Simon & Schuster would still be smaller than Penguin Random House on its own. HarperCollins has a nearly 11 percent share of the market for print books in the United States, according to Circana BookScan, while Simon & Schuster has 7 percent. Penguin and Random House has 21 percent.
In an opinion filed last fall, Judge Florence Pan of the United States District Court for the District of Columbia, who ruled against Penguin Random House, indicated that a smaller publishing company might successfully acquire Simon & Schuster. But selling to another publisher remained a risk.
Though KKR is paying less than what Penguin Random House had agreed to pay, the difference is made up partly by the cash Simon & Schuster has generated over the last two years and the termination fee paid to Paramount.
Simon & Schuster, which will celebrate its 100th anniversary next year, was founded by Richard L. Simon and M. Lincoln Schuster and began by publishing crossword puzzles. Today, it publishes more than 2,000 titles a year, including political blockbusters like “Too Much and Never Enough” by Mary L. Trump and novels like “It Ends With Us” by Colleen Hoover, which has spent an incredible 111 weeks on the New York Times best-seller list.
Since the previous deal crumbled, Simon & Schuster has continued to perform well. In the first quarter of 2023, its sales rose to $258 million, an increase of 19 percent over the prior year. Results at other major publishers, by contrast, were disappointing during that period.
Alexandra Alter contributed reporting.