Freshfields and Slaughters join US quartet on Penguin-Random House merger

Freshfields Bruckhaus Deringer and Slaughter and May have advised alongside four US firms on a deal between Pearson and media rival Bertelsmann to combine the companies’ publishing units, Penguin Group and Random House.

Simon Marchant
Simon Marchant

Freshfields London corporate partners Simon Marchant and Oliver Lazenby led on the UK side for Pearson and Penguin, the British group’s publishing arm, with support from IP partner Chris Forsyth and IP counsel Jill Delaney.

Morgan Lewis & Bockius advised Pearson in the US, with the team led by business and finance partners Benjamin Wills in Philadelphia and Charles Engros in New York.

Slaughters corporate partners Charles Randell and Craig Cleaver led on the UK side for longstanding client Bertelsmann alongside US adviser Davis Polk & Wardwell, which fielded New York corporate partner Christopher Mayer.

The Slaughters team also included corporate associates Chris Neubauer, Daniel Okusaga and Carsten Wettich, competition partners Philippe Chappatte and John Boyce, competition associates Natalie Yeung, Mariko Tavernier and Murray Reeve, IP partner David Ives, IP associate Brett Sherrard, pensions and employment partner Sandeep Maudgil, pensions and employment associates Ed Smith and Sarah Ferguson, tax partner Tony Beare and tax associate James Olsen.

Bertelsmann was advised by in-house lawyers Bettina Wulf and Denise Abel on the corporate side and Penny Newman on the competition side.

US firm Cooley also advised the German group on antitrust matters, fielding Washington DC partner Jacqueline Grise, while Baker & McKenzie advised it on tax matters, fielding London partner Alex Chadwick.

The deal sees Penguin merge with Random House, part of Germany’s Bertelsmann, to form Penguin Random House.

As part of the deal, announced today (29 October), Bertelsmann will own 53 percent of the combined business, while Pearson will own 47 percent. The deal is set to close in the second half of 2013, subject to regulatory approvals.

Random House worldwide chairman and CEO Markus Dohle will become CEO of the combined group, with Penguin chairman and CEO John Makinson taking the role of chairman of the board of directors. Bertelsmann will select five representatives on the new board of directors and Pearson four.

The merger brings together the duo’s publishing divisions in the UK, the US, Canada, Australia, New Zealand, India and South Africa, as well as Penguin’s publishing company in China, and Random House’s Spanish-language publishing operations in Spain and Latin America.

It excludes Random House’s Munich-based German-language publishing arm, Verlagsgruppe Random House, which will not be part of the merged group and will remain purely under the Bertelsmann umbrella.

Bertelsmann said the new company would preserve Random House’s and Penguin’s autonomy and separate editorial identities.

Pearson, listed in London and New York, dates back to its foundation in 1844, although publisher Longman, which Pearson acquired in 1968, traces its roots back to 1724. Aside from Penguin, its highest-profile divisions include the Financial Times Group.

Bertelsmann, founded in 1835, is 80.9 per cent owned by foundations including the Bertelsmann Stiftung, or Bertelsmann Foundation, a non-profit organisation, and 19.1 per cent by the Mohn family.

Background to this deal:

Freshfields is a longstanding adviser to Pearson, with recent deals by the magic circle firm for the client including the acquisition of vocational training company Melorio, in which London corporate partner Stephen Hewes led for the media group (25 May 2010). Pearson has also instructed Herbert Smith on occasions.

Morgan Lewis has advised Pearson for years, including most recently on its $650m acquisition of online learning services company EmbanetCompass earlier this month, in which New York business and finance partners Sheryl Orr and Charles Engros led.

Slaughters has longstanding ties to Bertelsmann, which it guided through the European Commission’s approval of its joint venture to merge its recorded music business, BMG, with Sony Music. Bertelsmann turned to Davis Polk’s Mayer for corporate advice on the deal (5 August 2008).