Mere days after a proposed Random House/Penguin merger was announced, it seems HarperCollins might merge with Simon & Schuster, the WSJ says. HarperCollins is owned by News Corp and S&S is part of CBS. NewsCorp’s Rupert Murdoch was said to be interested in acquiring Penguin before Bertelsmann’s Random House swept in and ran off with the company. A combined HarperSchuster would be the second largest book publisher, after Random Penguin, with the two companies accounting for some 18% to 20% of the book business.

The article—which you may not be able to read in the link but can be found if you Google it—says this is just preliminary talk and nothing is settled. (The article also includes the handy chart to the left showing just how big all these mega publishing houses are.) The move is also tied in with News Corp’s plan to split into two divisions—an ultra-profitable entertainment company that includes the movie studio and Fox News, and a smaller group containing such endangered publishing businesses as HarperCollins and the Wall Street Journal itself.

While HarperCollins is relatively small to News Corp. in the media giant’s current form, it could account for more than a fifth of the new publishing company’s roughly $500 million of operating income for the fiscal year ending in June 2013, according to Michael Nathanson of Nomura Securities.

The new publishing company is expected to have a significant amount of cash on its balance sheet, potentially to be used for acquisitions. One motivation for the split is the flexibility to pursue the purchase of old-media companies that may have turned off current News Corp. investors, according to a person familiar with the company’s strategy.

The LA Times has more analysis of the potential deal:

If HarperCollins and Simon & Schuster were to merge, publishing's current "big six" companies would become an uneven foursome: two mega companies and two much smaller ones, Macmillan and Hachette. The bookstore Waterstone's on Oxford Street in London tweeted, "it's only a matter of time before Macmillan and Hachette merge to form Machete."

Consolidation fever. Catch it.


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