Paramount Global said it agreed to sell publishing company Simon & Schuster to KKR for $1.62 billion.
Simon & Schuster was deemed to be a noncore asset for Paramount, which reported a second quarter loss and is looking to cut its debt.
Paramount had previously agreed to sell Simon & Schuster to rival publisher Bertelsmann’s Penguin Random House for $2.2 billion, but that deal fell through after it was blocked by the Justice Department over concerns the merger would lessen competition for publishing rights.
“We are pleased to have reached an agreement on a transaction that delivers excellent value to Paramount shareholders while also positioning Simon & Schuster for its next phase of growth with KKR,” said Paramount CEO Bob Bakish. “The proceeds will give Paramount additional financial flexibility and greater ability to create long-term value for shareholders, while also delevering our balance sheet.”
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On Paramount’s earnings call Monday, chief financial officer Naveen Chopra said that the company didn't lose much despite the new deal's lower price.
“Between the $1.62 billion sale price, the $200 million termination fee paid by Penguin Random House and the cash flow we received during the pendency of the deal process, we will realize approximately $2.2 billion of gross proceeds,” Chopra said.
After the closing of its sale to the investment firm, Simon & Schuster will become a standalone private company and will continue to be led by Jonathan Karp, president and CEO and Dennis Eulau, chief operating officer and CFO.
“We see a compelling opportunity to help Simon & Schuster become an even stronger partner to literary talent by investing in the expansion of the company’s capabilities and distribution networks across mediums and markets while maintaining its 99-year legacy of editorial independence,” Richard Sarnoff, chairman of media at KKR, said. “We also believe the opportunity to create an ownership culture within one of the world’s top publishers has enormous potential to create value for all of Simon & Schuster’s stakeholders.”
The investment builds on KKR’s current and prior investments in content-oriented media businesses including Epic Games, Mediawan, Leonine Studios, Artlist, Skydance Media, BMG and RBmedia.
LionTree Advisors is acting as financial adviser to Paramount.
