German media company Bertelsmann said it will buy the U.S. publisher Random House Inc. to become the world's largest publisher of English-language general books in a transaction estimated to be worth at least $1.1 billion.
Bertelsmann, which owns U.S. publisher Bantam Doubleday Dell, bought the company from Advance Publications Inc., controlled by the Newhouse family. The purchase will give Bertelsmann English-language sales of $1.1 billion to $1.7 billion, surpassing the $900 million in sales by Pearson Inc.'s Penguin.
"This is a continuation of what is going on all over the world," said Allan Raphael, a general partner at Raphael CRI Global.
Bertelsmann, the world's third-largest media company after Time Warner Inc. and Walt Disney Co., said it will combine Bantam Doubleday Dell under Random House management.
It named Peter Olson, chief executive of Bertelsmann Book Group North America, to become new chief executive of Random House.
"Since the purchase of U.S. publisher Bantam Books in 1997, it was a strategic priority to strengthen the key business of books and develop a leading position in the Anglo-American book market," Bertelsmann Chief Executive Mark Woessner said.
Random House was likely sold for 1.3 to 1.5 times the company's annual revenue, said Richard Read, analyst at Credit Lyonnais. Woessner said Random House's annual sales were about $870 million. Based on Read's estimate, that equates to a sale price for the company of at least $1.1 billion.
Book Publishing Report, an industry newsletter, estimated Random House's 1996 revenue at $1.22 billion. Random House declined to release sales information.
"[Bertelsmann] wants to expand [its] broad-based publishing operations," Read said. "They are a company that generates loads of free cash flow and they have a very strong balance sheet. They should have no trouble financing this."
Random House and Bantam Doubleday Dell will be operated separately, Woessner said, until the purchase is approved by U.S. antitrust authorities. He said he expects the sale to be completed by about midyear.
Random House owns a vast line of publishers, including Knopf Publishing Group, Crown Publishing, Ballantine Publishing and Fodor's Travel Publications.
For Guetersloh, Germany-based Bertelsmann, it marks a renewed push into the world's largest media market. The U.S. already accounts for 27% of its sales.