ViacomCBS announced the sale of Simon & Schuster, its venerable book-publishing house, in early March, a time when it sure would have been nice to know what Donald Trump told Bob Woodward, an S&S author, about the deadliness of the coronavirus. Since then S&S has racked up a string of election-year blockbusters, making it the talk of the publishing industry.
In July, S&S published the most talked-about book of 2020, Mary Trump’s Too Much and Never Enough, which chronicled her uncle’s demented upbringing and their dysfunctional family. The book sold 1.35 million copies in its first week alone and remains the number one best-selling book on Amazon for 2020. S&S also published the aforementioned Woodward’s Rage, another big best seller and the 13th-most-popular book on Amazon so far this year. John Bolton’s The Room Where It Happened is the seventh-most-popular book on Amazon in 2020.
But that’s not all. Michael Cohen’s Disloyal was published in September by Skyhorse, whose books are distributed by S&S; it is currently the 47th-most-popular book on Amazon this year. S&S and its imprints have many other best sellers too, including Jerry Seinfeld’s Is this Anything?, Candace Owens’s Blackout, Tom Fitton’s A Republic Under Assault, and Ruth Bader Ginsburg’s My Own Words. The company also published Melania and Me, by Stephanie Winston Wolkoff, and Hoax, by Brian Stelter.
Not surprisingly, the plethora of best sellers has translated into financial performance, especially in the third quarter, which ended in September. According to the S&S results, released last week, third-quarter revenue of 2020 was $279 million, up 29% from the third quarter of 2019, while S&S’s version of EBITDA—what ViacomCBS calls OIBDA, operating income before depreciation and amortization—was $58 million, up 5% from the third quarter of 2019. Since S&S is being sold, ViacomCBS doesn’t say much about it anymore in its public filings with the Securities and Exchange Commission. The only explanation ViacomCBS had for why S&S’s third-quarter OIBDA did not keep pace with its third-quarter revenue gain was “higher author expenses”—it had to pay up for the books it published—“and increased costs associated with the mix of titles,” whatever that means. In the latest 12 months for which financial information is available, S&S had revenue of $864 million, compared to $814 million in revenue for 2019, and OIBDA of $149 million, a modest 4.2% increase above the $143 million in OIBDA S&S had in 2019.
Not terrible considering the pandemic has not only kept most everyone in book publishing working from home, but also has roiled the printing companies, which have suffered delays and shortages of supplies, such as paper and ink. S&S also has managed well the untimely death, in May, of Carolyn Reidy, the longtime head of S&S. Reidy was quickly succeeded by Jonathan Karp, who had been the publisher of the Simon & Schuster adult publishing division. He is the CEO of the company now and, in addition to his other tasks running the place, is likely the one interacting with potential buyers.
And what about the sale process? There has been near radio silence since the March 4 announcement that the business was for sale—that’s a long time in the deal business, although no doubt the pandemic has made the process for all M&A deals more challenging. ViacomCBS hired Aryeh Bourkoff, the founder of LionTree LLC—a respected advisory boutique that specializes in media deals—to run the process. “I have a really good sense of how that’s going to go,” Bourkoff told me in early March before the lockdown of New York City began. These days he has no comment about the sale process. Justin Dini, the head of corporate communications at ViacomCBS, wrote in an email that the company had no comment about the process either. In the ViacomCBS earnings call last week, Bob Bakish, the ViacomCBS CEO, said the company still intended to sell S&S (as well as Black Rock, the famed Manhattan office tower where CBS had its headquarters) and that it would be sold “at a time and in a form where we think we can maximize value.” He said S&S in particular is a business “that we think has been performing extremely well of late and is a very valuable asset.” According to Dini, at a Goldman Sachs investor conference in September, Bakish said of both S&S and Black Rock, “We’ve seen significant interest in both of those assets, and we’ll proceed with those when market conditions allow.”
Even though Bakish or Bourkoff would never admit it, S&S may not be the easiest asset to sell, especially in the middle of pandemic. On the one hand, it is a valuable business, at least in the sense of its scarcity value. It is one of the “Big Five” publishing houses, including Penguin Random House, owned by Bertelsmann, the private German conglomerate; HarperCollins, owned by the Murdochs; Macmillan Publishers, owned by Stefan von Holtzbrinck and where my wife works; and Hachette Book Group, owned by the French conglomerate Lagardère Group. It is rare for one of the Big Five publishing houses to hit the market.
In September, Publishers Weekly, the book-publishing-industry bible, reported that both Bertelsmann and HarperCollins expressed interest in buying S&S. Lagardère has also expressed interest in buying S&S in order for Hachette to get bigger and to compete more effectively against bigger players like Penguin Random House. Bertelsmann seems determined. “We’ve been the most active player on the consolidation of the book-publishing market in the last 10 years,” Thomas Rabe, the CEO of Bertelsmann, told the Financial Times in September. “We combined Penguin and Random House very successfully to create by far the largest book publisher in the world, actually the only global book publisher. Given this position we would, of course, be interested in Simon & Schuster.” He dismissed concerns that there might be antitrust issues around Bertelsmann acquiring S&S. According to sources inside S&S, there also remains hope that a buyer from outside the industry will step up, if only for S&S to keep a semblance of its independence, rather than be swallowed up by a competitor. Among the names bandied about as possible buyers are Vivendi, the French media conglomerate, and a slew of private-equity firms, which are loaded to the gills with equity dollars looking for a home.
But there are complications, too, for the sale. First is the unfortunate fact for ViacomCBS that another big publisher, Houghton Mifflin Harcourt, said last week it was exploring the sale of its trade division to focus instead on its digital-first education business. Houghton Mifflin, with trade-division revenue of $129 million in the first nine months of 2020, slightly more than the first nine months of 2019, is not one of the Big Five, but it could be an easier morsel for competitors and private-equity funds to swallow. In any event, having a competing business also for sale at the same time as S&S will not make the S&S sale easier, at least from a timing perspective.
Then there is the matter of price expectations. According to the Wall Street Journal, ViacomCBS is looking for at least $1.2 billion for S&S. In March the New York Times suggested a price closer to as much as $1.5 billion could be in order. Ten times OIBDA, or a price tag of near $1.5 billion, is not out of the question for a jewel like S&S, especially with the cost of capital—and debt in particular—remaining low. In 2019 private-equity firms paid an average purchase price multiple of 11.5x EBITDA, a historic high-water mark. That average purchase price multiple has cooled considerably in 2020 amid all the turmoil.
Two key questions remain for ViacomCBS: What is taking so long for the sale to be consummated, and is it willing to part with S&S at a price below its expectations? No one who knows is talking, obviously, but the answers to these questions might make for a thriller themselves.
— The 10 Moments When Trump Lost the 2020 Election
— Trump’s Plans to Barricade Himself in the Oval Office
— Joe Biden’s Campaign Manager Told the Political Future—And Was Right
— Republicans Are Standing by Trump, Even as the World Moves On
— A Vigil With Donald Trump’s Ghosts
— Kayleigh McEnany: White House Press Secretary and Donald Trump’s Election Cheerleader
— Cover Story: AOC’s Next Four Years
— From the Archive: Presidential Club Rules and Why Trump Will Be Left Out of the Fraternity
— Not a subscriber? Join Vanity Fair to receive full access to VF.com and the complete online archive now.
