MARY LOUISE KELLY, HOST:
OK, to news now that a big-ticket item is finally off the market. Paramount has agreed to sell Simon & Schuster, the publishing company, to the investment firm KKR. The price tag - 1.62 billion. Now, Paramount nearly sold Simon & Schuster to Penguin Random House - that was last year - but the Justice Department blocked that sale. Jim Milliot writes for Publishers Weekly. He has been following this saga. Hey there, Jim.
JIM MILLIOT: Hey, good to be here.
KELLY: Hey. So we'll get to the impact on the industry, but start here. Will this be good news for readers if this sale goes through?
MILLIOT: I think it will. One of the big concerns about the Penguin Random House deal and one reason it was blocked was because it would have shrunk what they call the Big Five publishers, of which Penguin Random House and Simon & Schuster are one and three - down to four. And it would have made Penguin Random House really much bigger than any of its competitors. And this leaves the Big Five intact.
KELLY: Yeah. Full disclosure - I was with Simon & Schuster for years. I published a couple of novels with them. Might this be good news for writers, in your view?
MILLIOT: For sure. It was pretty uniform at the trial back at - when PRH was going through that, that many agents and many writers really wanted more options. And that was one of the rulings that really carried the day in that for writers to be able to make a living, they needed, you know, as many large players as possible still to be viable.
KELLY: Yeah. And some very high-profile writers indeed write with Simon & Schuster - Bob Woodward, Stephen King, who had spoken out against the sale to Penguin Random House. Now, that sale we mentioned was blocked because of these antitrust concerns. Is there any sign the Justice Department plans to intervene this time?
MILLIOT: No, not at all. And I think it's one reason why HarperCollins, which have bid for Penguin Random House earlier and is the second-largest trade publisher - Paramount was always a little wary about trying to get involved with any antitrust issues. So, you know, KKR, for all its might, you know, doesn't own another book publisher.
KELLY: Yeah.
MILLIOT: So there's, you know, no chance that the government would step in on this.
KELLY: Now, the price that appears to be on the table - 1.62 billion - that's way less, if I'm not mistaken, than what Penguin Random House had been willing to pay. Why the price drop?
MILLIOT: Well, couple things. That initial bidding process, apparently, by all accounts, was really fierce, and Penguin Random House was really determined to get it. The price shocked everybody. Traditionally, these type of trade houses go for maybe 1.2 times, 1.5 times sales, which, in the (inaudible) Random - I'm sorry, Simon & Schuster, there - it was about 1.2 million - billion last year. So that multiple of, you know, 1.6 is about right. And we can't forget that Paramount walked away with $200 million from a breakup fee when the deal didn't go through with Penguin Random House.
KELLY: Are you watching for any significant changes at Simon & Schuster? This will leave them as a standalone company, rather than being owned by a behemoth parent company.
MILLIOT: Right. I think it's generally good news for people at Simon & Schuster. As part of Paramount, especially over the last three years, they got very little resources to invest in publishing. Over the years, they've had - they haven't really made any outside acquisitions because there was all the internal growth, and Paramount wasn't all that interested in staying in the publishing industry.
KELLY: You seem to think this is good news for every player involved. Is there any downside? It makes you wonder why they didn't go this path in the first place.
MILLIOT: Well, I know there's going to be a lot of initial reaction to, oh, no, a private equity firm has bought it. And I understand that. You know, private equity firms don't have the greatest reputation for the way they treat companies and, you know, may not care all that much about the literary value of S&S. But I think in the end, it'll work out.
KELLY: That is Jim Milliot, editorial director of Publishers Weekly. Thanks so much.
MILLIOT: Anytime.
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