Paramount Global (PARA) announced Monday it would be scrapping its $2.2 billion deal to sell publishing company Simon & Schuster to rival Penguin Random House.
The move comes after a federal judge blocked the proposed merger at the end of October over concerns that it would “lessen competition” in the publishing industry.
Paramount’s press release said Penguin Random House must pay a $200 million termination fee for ending the merger and that it still plans to sell Simon & Schuster.
“Simon & Schuster is a highly valuable business with a recent record of strong performance,” Paramount said in the statement. “However, it is not video-based and therefore does not fit strategically within Paramount’s broader portfolio.”
Penguin Random House, owned by the German media company Bertelsmann, is one of the world’s largest and oldest media conglomerates. Bertelsmann released a statement on Monday saying it will advance its book publishing business without Simon & Schuster.
“We believe the judge’s ruling is wrong and planned to appeal the decision, confident we could make a compelling and persuasive argument to reverse the lower court ruling on appeal,” the statement read. “However, we have to accept Paramount’s decision not to move forward.”
The Department of Justice filed a lawsuit against the merger in November 2021. Best-selling horror author and Simon & Schuster client Stephen King testified in the DOJ case against the merger, saying large acquisitions hurt the publishing industry and authors.
“It becomes tougher and tougher for writers to find money to live on,” King said during his Aug. 2 testimony.
Under the Biden administration, the DOJ has been heavy-handed in handling anti-trust cases, blocking several mergers and acquisitions, specifically in cases involving tech companies.
“Penguin Random House is part of the Global Content Strategy, one of our five strategic priorities,” Bertelsmann CEO Thomas Rabe said in the statement, “Bertelsmann plans to achieve annual growth of five to ten percent in this area – organically, but also through acquisitions.”
Simon & Schuster CEO Johnathan Karpp released a letter to staff on Monday that stated the deal would not continue but that the company had “one of the single greatest years in our history” ahead of its centennial anniversary in 2024.
“I am grateful for your patience and dedication to our mission during all that has transpired over these many months since the sale began,” Karpp wrote. “Ultimately, what matters the most is the work we do together, on behalf of our authors and our books.”