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Penguin’s Random House Merger Clears EU Probe

(CN) - The European Commission cleared the creation of Penguin Random House, merging the publishing arm of Germany's Bertelsmann and British company Pearson.

Bertelsmann - a media giant with holdings in television and music in addition to Random House - and Pearson proposed the merger in February. After analyzing potential impacts on authors and the publishing business in the EU and worldwide, as well as on consumers downstream, the commission concluded Friday that the new company will face stiff competition from English-language publishers and a concentrated retail base.

The merger's impact on distribution and production also snared attention from the commission since both are distributors and Bertelsman owns printing divisions. Regulators found that both parties have a low market share in an already crowded market and that the merger will not impede competition in that regard.

Penguin Random House focuses on English-language trade publishing, encompassing Bertelsmann's Random House division in the United States, Canada, the United Kingdom, Australia, New Zealand, India and South Africa, and all of Penguin's holdings and assets. The new company will continue to service the Random House division in Spain and Latin America, as well as Penguin's companies in China and Brazil.

Pearson's contributions to the new company include its eponymous educational materials, the Financial Times newspapers and its Penguin publishing arm, including Dorling Kindersley books and Rough Guides. Bertelsmann continues to hold its German-language division Verlagsgruppe Random House.

News Corp. tried to buy Pearson's Penguin division last year, but the company rejected the bid and quickly signed contracts with Bertelsmann to avoid further action by Rupert Murdoch, according to an Oct. 29 article in the Financial Times. Under the terms of the deal, Bertelsmann owns 53 percent of Penguin Random House, while Pearson holds 47 percent.

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