Random House and Penguin May Be Combined

Rainer Jensen/DPA, via Agence France-Presse - Getty Images Thomas Rabe, the chief executive of Bertelsmann, has promised to transform the company.

1:07 p.m. | Updated PARIS - Pearson, the British media conglomerate, said Thursday that it was in talks to combine its Penguin publishing house with Random House, owned by Bertelsmann of Germany.

The deal, if completed, would bring together two of biggest book publishers in the world, uniting Penguin and its iconic orange logo with the owner of Crown Publishing and Knopf Doubleday. The combination would create a division with greater scale that could compete in a rapidly evolving e-book market. Traditional publishing houses have increasingly come under pressure, especially in the e-book category, from online retailers like Amazon and Apple.

Financial details of the discussions, which are said to be taking place in New York, were not immediately available, though Bertelsmann would end up controlling more than 50 percent of the combined companies, according to a person briefed on the discussions who was not authorized to speak publicly.

Bertelsmann, which is based in Güttersloh, Germany, declined to comment. Pearson said in its statement that there was no certainty that the talks would lead to a deal.

A big question hanging over any combination of Random House and Penguin would be antitrust issues. Together, Penguin and Random House would control more than 20 percent of the United States book market, for example. In Europe, regulators have demanded significant divestitures as a condition for approval of another recent acquisition in the cultural sector, the purchase of EMI by the French media company Vivendi, which owns Universal Music.

The discussions were first reported by The Financial Times.

David Godwin, a leading literary agent in London, said he thought a merger could be an ”uneasy mix” because of the way the companies are structured. At Random House, the different imprints share some functions, like publicity and printing, while Penguin imprints are more autonomous.

He also questioned whether a new owner would be able to generate significant savings or other benefits from an acquisition or a merger with another publishing house.

”It's not clear why Pearson would sell,” Mr. Godwin said. ”I cannot imagine anyone managing that outfit better than they do now.”

But analysts say Thomas Rabe, the chief executive of Bertelsmann, is under pressure to make a deal because some of the company's existing bus inesses are slowing, with no clear plans for growth in the digital era. Mr. Rabe took over about a year ago from Hartmut Ostrowski, who was seen as more of a caretaker, and immediately announced plans to transform Bertelsmann.

Among other things, he changed the company's legal structure to permit a possible initial public offering of stock, which could raise funds for an acquisition. But one of Mr. Rabe's targets, EMI, eluded him.

Buying Penguin would be a big move, though not necessarily the most forward-looking one, given that book publishing, over all, is stagnant or in decline.

”If you're Bertelsmann, would you want to invest in such a slow-growth business?” asked Ian Whittaker, an analyst at Liberum Capital.

Questions over strategy have also surrounded Pearson, in the wake of news this month that Marjorie Scardino, the chief executive, planned to step down at the end of the year. Pearson has been building up its educational publishing busines s, prompting speculation over two other units, Penguin and The Financial Times, and whether Pearson would eventually sell them.

Meanwhile, questions hang over several other Bertelsmann businesses, including RTL, the biggest commercial television broadcaster in Europe. There, a respected chief executive, Gerhard Zeiler, resigned shortly after Mr. Rabe was appointed to head the parent company.

There have also been reports that Bertelsmann was interested in making a bid for Springer Science and Business, a big professional and trade publisher that Bertelsmann already owned once before, from 1999 to 2003.

Bertelsmann has a history of getting in and out of businesses. In 2008 it sold its share of the Sony BMG music company to its Japanese partner. But Bertelsmann later decided to get back into music in a smaller way, starting a music publishing venture with the private equity firm Kohlberg Kravis Roberts.