Dividends and Antitrust trial on Penguin Random House, Simon & Schuster merger a key test for Biden

Everyday on the stock exchange there are mergers and acquisitions announced, some will be very good, some with be average and soon will not work out. The results of the merger and acquisitions can only be seen in retrospective or well after the process goes through. Many of the mergers will be add ons to the company, but some are mergers between giants in the industry. Although there are giants in the industry, change is happening to the normal practice of the industry and companies are trying to deal with the what worked in the past. Will it work in the future? maybe or maybe not. Government tend to look at the way the industry was in the past, not necessarily the threats in the future.

In an article by Marcy Gordon and Hillel Italie of the Associated Press, in the world of book publishing two giants are trying to merge – Penguin Random House and Simon & Schuster. The cost of merger is $2.2 billion. In large mergers, the Competition Bureau through the Justice Department has to sign off, the are objecting and the trial begins in August and likely last until October.

The government contends that the merger would hurt authors and ultimately readers. The publishers counter that the merger would strengthen competition among publishers to find and sell the hottest books, by enabling the combined company to offer bigger advance payments and marketing support to authors. It would benefit readers, booksellers and authors.

The Big 5 – Penguin, Simon & Schuster, Hachette, HarperCollins and Macmillan – dominate 90% of the market for anticipated top selling books.

Under former President Trump, the competition bureau allowed more mergers and acquisitions.

Linking to dividend paying stocks, governments change and sometimes the policies change at greater than the margin. One of the keys is how does governments look at mergers and acquisitions? Is it good because all governments tend to want growth; it is bad because people will be let go on cost savings; what do the political leaders think about the balance? When governments change, how well does the government relations department relate to the existing government.

There are more questions than answers, till the next time – to raising questions.

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