Hachette Book Group (HBG) announced on March 1 that it had entered into an agreement to buy the Perseus Books Group, an independent publishing company. On March 3, Ingram Content Group announced its plans to purchase Perseus’s distribution operations. The two agreements come a little more than 18 months after an initial deal to sell Perseus’s entire operation to HBG fell through. Both parties hope to close the deals by the end of March, pending regulatory approval. Terms of the transaction were not disclosed.
Perseus’s publishing arm will become a new division of HBG headed by Susan Weinberg, currently senior VP and group publisher, who will report to HBG CEO Michael Pietsch. Perseus CEO David Steinberger, who has headed the company since 2004, plans to leave the company once the sale is finalized, although he did not disclose his future plans, noting, “Right now I’m really just focused on this [transaction].”
Some 650 employees in nine cities will become employees of HBG, including those of Perseus’s imprints—Avalon Travel, Basic Books, Basic Civitas, Beast Books, Da Capo, Nation Books, PublicAffairs, Running Press, Seal Press, Weinstein Books, Westview, and Vanguard Press. “Everyone’s coming,” said Pietsch. “They’ve got a lot of great books coming up and we want them to continue working on them and publishing them as brilliantly as they already do.”
Ingram will likewise incorporate the publisher’s distribution arm, consisting of Perseus Distribution, Publishers Group West (PGW), Consortium Book Sales and Distribution, and Legato Publishers Group, “but leaving people for the most part in place,” according to Ingram president and COO Shawn Morin. “Our intent is to leave everything intact. But over time we are going to integrate it into Ingram, and we think at the end of the day it’ll provide better support for our customers.”
THE SECOND TIME AROUND
HBG first entered into negotiations with Perseus in June 2014, agreeing to buy the entire operation and then sell the distribution arm to Ingram. The sale dissolved in August, days before it was finalized. Perseus resumed its search for a buyer and conducted a reorganization of the company, which included appointing Weinberg as VP and naming Mark Suchomel president of client services, heading the distribution side. Hachette was at the time embroiled in a battle with Amazon over ebook pricing, which the two settled in November.
“When that transaction didn’t close,” recalled Steinberger, “we became focused again on building a business for the long term.” There followed a year of record sales, he told LJ, and “we began to get inquiries again from potential interested parties.”
In February 2015 the private investment firm Centre Lane Partners became majority owner of Perseus’s investment funds. Then in September—just over a year after the initial deal with HBG was abandoned—Perseus again began exploring options for the sale of the company. The publisher engaged the investment banking firm Greenhill & Co., which had brokered the sale of Scholastic’s educational publishing group to Houghton Mifflin Harcourt in May of that year. This time around, the two companies came to the table separately. “The clear difference is that it’s a much more straightforward structure with individual sales that are separate and not dependent on one another,” said Steinberger.
Both potential buyers had maintained their interest in Perseus, and negotiations were able to move forward quickly. “Our interest had never waned,” said Pietsch. “We had stayed in touch. So we were very happy to renew those discussions, which we were very well prepared for from our previous experience.” Added Morin, “We were interested in it back in 2014 and we remained interested the whole time. We’re looking forward, not back.”
The sale comes on the heels of several major publishing consolidations over the past several years, including the merger of Penguin Group and Random House in 2013. Perseus is HBG’s largest acquisition to date. “If you take the long view, I’d be so bold as to say we’ll have two big trade publishers ten years from now, and no more,” Mike Shatzkin, cofounder and CEO of the Logical Marketing Agency, a digital marketing service for publishers, told the New York Times (a sentiment that represents a change from his conjecture to LJ in 2013 that the next decade would see the U.S. market boil down to a Big One).
EXPANDING THEIR RANGE
Perseus was founded in 1995 by financier Frank Pearl as an independent publishing company with a focus on backlist titles and literary fiction. Pearl died in May 2012. The company currently publishes about 500 new titles a year—mainly nonfiction, children’s books, and some contemporary fiction—with much of its publishing income derived from its 6,000 backlist titles. Annual revenues are estimated at about $400 million—$100 million from its publishing arm and $300 million from the distribution business. The publisher also has partnerships with The Economist, the Nation Institute, Participant Media, and the Weinstein Company.
Perseus’s distribution arm was launched in 2005. It serves some 600 independent publishers, including Akashic Books, Bellvue Literary Press, BenBella Books, Chouette, City Lights, Columbia University Press, Copper Canyon Press, ECW Press, Frommer’s, Grove Atlantic, Harvard Business Press, McSweeney’s, New World Library , Nomad Press, Theatre Communications Group, and Zagat. In addition, Perseus’s digital platform, Constellation, serves some 450 publishers worldwide.
Hachette, one of the big five publishing companies, owns Grand Central Publishing; Little, Brown and Company; Little, Brown Books for Young Readers; Hachette Books; Hachette Nashville; Orbit Books; and Hachette Audio. It publishes about 1,200 books a year, as well as 300 audiobooks. Hachette’s parent company, Hachette Livre, owned by the French conglomerate Lagardère, has been looking to expand its publishing arm in the United States, and HBG has been interested in adding nonfiction titles to its fiction-heavy catalog. The acquisition will “add a 6,000-title backlist full of gems,” Pietsch told LJ. “It means we’ll be adding something like 425 new titles a year to our output, which is a significant title count increase for us…. This expands our range; it gives us a lot more depth in what we offer.”
“One of the things we’ve been focused on at Ingram for the last several years,” Morin told LJ, is “transforming the company to be a premier service provider, in and around the distribution, production, storage, creation, and assembly of content. This fits really nicely into where we’re taking the company.” He added, “This gives us an opportunity to add some dedicated product expertise to our library business…. [Perseus has] a lot of expertise, and we think bringing that to the library market’s going to be a positive thing.”
Added Steinberger, “Libraries have always been a major customer base for [Perseus], and I would expect that to absolutely continue.”
By all accounts, the two companies’ acquisition of Perseus will strengthen both of its operations. “Perseus is really strong in sales and marketing; Ingram is really strong in operations and logistics; I think together we’re going to have a combined offering that’s better than either of us were separately,” said Morin.
Steinberger expressed appreciation for both the team at Perseus, which built a solid business “around the mission to enable independent publishers to succeed and to reach their potential,” and its new owners. “I am pleased with the homes we’ve found for the business and for the people,” he told LJ. “Ingram and Hachette are great companies; they’re led by people with real commitment to books and authors for the long term. They’ve shown tremendous appreciation for what’s been created at Perseus.” Added Steinberger, “All the steps that they’ve been taking in terms of planning for this transition suggest a real commitment to maintain what’s been created and build on it, which is really gratifying.”