FRANKFURT (Reuters) - German media group Bertelsmann (BTGGg.F) may raise its stake in book publisher Penguin Random House, it said on Wednesday after British joint venture partner Pearson (PSON.L) issued a major profit warning and said it might sell the stake.
“We are open to increasing our stake in Penguin Random House, provided the financial terms are fair,” Bertelsmann Chief Executive Thomas Rabe said in a statement.
“Strategically this would not only strengthen one of our most important content businesses, it would also once further strengthen our presence in the United States, our second largest market,” he added.
Bertelsmann and Pearson combined their book-publishing businesses in 2013. Bertelsmann holds 53 percent of the joint venture and has the right of first refusal to buy Pearson’s 47 percent stake.
Pearson sold the Financial Times newspaper and its stake in The Economist magazine in 2015 to concentrate on education. But textbooks are going out of fashion as students opt for digital alternatives or rent instead of buy.
Bertelsmann has repeatedly said that it wanted to increase its stake in Penguin Random House, the largest general-interest paperback publisher in the world.
Last year, Rabe told reporters that Bertelsmann would not buy Pearson’s entire stake and said it had been approached by a number of investors who would be interested in participating in a deal.
On Wednesday, Rabe said in an interview published on the company’s intranet: “We are prepared.”
Penguin Random House is the publisher of Paula Hawkins’ “Girl on the train”, which sold 4 million books, e-books and audiobooks last year. It also is home to top-selling authors Dan Brown, John Grisham and E.L. James.
At an valuation of 10 times earnings before interest, tax and amortization (EBITA), Pearson could raise about 1.2 billion pounds ($1.5 billion), analyst Ian Whittaker at Liberum said in a client note.
A Bertelsmann spokesman declined to give details beyond Wednesday’s statement.
Reporting by Harro ten Wolde; Editing by Edward Taylor and Georgina Prodhan