Paramount to Sell Simon & Schuster to KKR for $1.62 Billion

Paramount Global said it has agreed to sell book publisher Simon & Schuster to private-equity firm KKR for $1.62 billion in cash, a financial boost that the entertainment conglomerate said it would use in part to reduce debt levels. 

“The proceeds will give Paramount additional financial flexibility and greater ability to create long-term value for shareholders, while also delevering our balance sheet,” Paramount Chief Executive Bob Bakish said in a statement. 

The deal comes less than a year after a federal judge in late October 2022 blocked Penguin Random House from acquiring Simon & Schuster for about $2.18 billion, saying the deal would have financially harmed some authors. 

The Wall Street Journal last week reported that KKR was in advanced talks to acquire Simon & Schuster. 

The announcement of the sale comes as Paramount reported second-quarter earnings Monday. The company said it swung to a loss of $299 million from a profit of $419 million in the year-earlier period, while revenue fell 2.1% to $7.62 billion.

The loss was partly caused by nearly $700 million in programming charges, which Paramount said are tied to contract termination costs, development costs sunk into abandoned projects and other impairment charges related to content that the company has decided to remove from its streaming platforms. Paramount Global didn’t report any programming charges in the second quarter a year ago.

The company said its flagship Paramount+ streaming service gained 700,000 subscribers in the quarter, totaling approximately 61 million. Overall, Paramount’s streaming unit lost an adjusted $424 million in the quarter, less than the adjusted $445 million it lost in the year-earlier period.

Paramount shares were up 1.9% in after-hours trading.

The company, home of the CBS broadcast network, cable channels including Comedy Central and Nickelodeon, and the Paramount Pictures movie studio, said its filmed-entertainment unit saw revenue fall sharply to $831 million from $1.36 billion in the year-earlier period, when megahit “Top Gun: Maverick” was released.

Addressing the continuing strikes by Hollywood writers and actors, Bakish said the company had to make adjustments to its CBS fall slate, which will feature content from its cable and streaming properties, such as Paramount Network’s “Yellowstone” and Paramount+’s “SEAL Team.”

“We’re saddened that, as an industry, we couldn’t come to an agreement that would have prevented this,” Bakish said of the strikes.

Paramount has been looking to sell assets to devote more resources to its streaming business. The company is also exploring a sale of a majority stake of BET Media Group, which includes its BET and VH1 cable networks and its BET+ streaming platform, the Journal previously reported. That sales process is ongoing, according to people familiar with the situation.

Paramount has also explored selling a majority stake in Noggin, its online learning service for preschool children.

Similarly, the company has made moves to reduce costs. In the first quarter, Paramount cut its quarterly dividend payout to 4 cents a share, down from 24 cents a share.

Paramount said it expected the $1.62 billion Simon & Schuster sale to yield approximately $1.3 billion in net proceeds.

A sale of Simon & Schuster to KKR is unlikely to generate the same concerns that led a judge last fall to block Penguin Random House from acquiring the publisher, said Prof. Keith Hylton,

“The Justice Department was concerned that the merger with Penguin Random House would reduce the number of competing purchasers of book manuscripts,” he said. “Selling to a private-equity firm won’t reduce the number of competitors.”

With an 8% share of the U.S. book market as of July 8, Simon & Schuster is the country’s third largest publisher, according to book tracker Circana BookScan, behind Penguin Random House’s 21% share and HarperCollins Publishers’ 11%. Those market shares exclude third-party distribution clients. HarperCollins, like the Journal, is owned by News Corp.

After the closing of the transaction, Simon & Schuster will become a stand-alone private company and will continue to be led by Jonathan Karp, Paramount said Monday.

Simon & Schuster, which is nearly a century old, is the publishing home of many high-profile authors including Stephen King and Bob Woodward. It also publishes such writers as Ernest Hemingway and F. Scott Fitzgerald. Current bestsellers on The Wall Street Journal list for the week ended July 29 include Jennette McCurdy’s memoir “I’m Glad My Mom Died” and Brad Thor’s thriller “Dead Fall.”

It also is one of the country’s leading publishers of high-profile political works. Last November, it published former Vice President Mike Pence’s memoir “So Help Me God,” while earlier titles included former national security adviser John Bolton’s “The Room Where It Happened: A White House Memoir” and Mary L. Trump’s memoir “Too Much and Never Enough: How My Family Created the World’s Most Dangerous Man.”

“The real question is what kind of steward KKR will be for one of the best and boldest publishers in the world,” said literary agent Richard Pine. “Simon & Schuster has been especially good at wading into areas of controversy. Will that continue under KKR?”

John Sargent, the former chief executive of Macmillan, also a leading publishing house, said he expects KKR to “give Simon & Schuster the same wide publishing latitude they’ve always had.” If another major publisher had acquired Simon & Schuster, he added, there would have been significant consolidation and layoffs.

Richard Sarnoff, chairman of media at KKR, said in an interview that Simon & Schuster will have full editorial independence. “We believe in the value of a 99-year old enterprise that has proven itself to be a successful arbiter of culture, and a successful promoter of the best writers.”

Sarnoff also said Simon & Schuster employees would have equity participation in the business.

KKR, an investment firm with over $500 billion in assets under management, is no stranger to the media world. It has invested in Axel Springer, the German media conglomerate that owns both Business Insider and Politico.

KKR recently said it was selling its audiobook-publishing business, RBmedia, to fellow private-equity firm H.I.G. Capital, after owning the company for about five years.

—Laura Cooper contributed to this article.

Write to Jeffrey A. Trachtenberg at [email protected] and Jessica Toonkel at [email protected]