Penguin and Random House to merge

The owners of Penguin and Random House have announced a deal to merge their publishing arms to create the world's biggest book publisher.

Bertelsmann, which owns Random House, will own 53% of the newly created group and Random House boss Markus Dohle will be chief executive. Penguin's owner Pearson will retain 47%, with its man John Mackinson, currently chairman and chief executive of Penguin, stepping up as chairman of the joint venture, which will be called Penguin Random House.

The announcement scuppers the hopes of Rupert Murdoch's News Corporation to crash the merger plans. Reports over the weekend suggested News Corp's publishing arm, HarperCollins, could put a £1bn bid for Penguin to the board of Pearson this week.

Random House has annual sales of £1.5bn, while Penguin sales topped £1bn last year. The combined group will publish 25% of all books sold in the UK from authors as diverse as TV chef Jamie Oliver, Fifty Shades of Grey author EL James and diver Tom Daley.

The combined market share of the two book publishers means the deal is expected to face an inquiry from the competition commission. Analysts, however, suggest it is likely to be waved through as regulators allowed the music industry to be consolidated down to just three big players. The companies expect to complete the deal in the second half of next year, if they win the approval from the regulators.

Bertelsmann chairman and chief executive Thomas Rabe said the merger would advance the group's digital transformation and increase its presence in Brazil, India and China.

Pearson's chief executive, Marjorie Scardino, said: "Together, the two publishers will be able to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers."

The announcement comes just weeks after Scardino announced her intention to stand down after 15 years at the helm. Her exit sparked speculation that the Financial Times could be sold, as she had vowed that would only happen "over my dead body".