Paramount mentioned on Monday it had reached a deal to promote Simon & Schuster, one of many greatest and most prestigious publishing homes within the United States, to the private-equity agency KKR, in a serious altering of the guard within the books enterprise.

The deal, for $1.62 billion, will put management of the cultural touchstone behind authors like Stephen King and Bob Woodward within the fingers of a monetary purchaser with an increasing presence within the publishing business.

While personal fairness traders have had a major footprint within the ebook enterprise — completely different corporations have owned literary businesses, publishing homes and the retailer Barnes & Noble — the acquisition of one of many largest publishers within the nation vastly will increase the maintain of economic pursuits within the enterprise.

“I think I speak on behalf of the entire management team when I say we are thrilled with the result,” Jon Karp, chief govt of Simon & Schuster, mentioned in an interview. “They plan to invest in us and make us even greater than we already are. What more could a publishing company want?”

Mr. Karp will keep on as chief govt after the deal closes.

Richard Sarnoff, an adviser to KKR on its media offers, is a well-known title to many within the publishing business and his involvement is encouraging, mentioned a number of publishing executives on Monday. Mr. Sarnoff has held a number of positions at Bertelsmann, the corporate that owns Penguin Random House, and served as chairman of the Association of American Publishers, a commerce group.

In letters to Simon & Schuster’s employees members and authors, Mr. Karp mentioned that he had identified Mr. Sarnoff for twenty years, and that he “understands the nuances of the book business as well as anyone I know.”

Also concerned is Ted Oberwager, who leads KKR’s gaming, media, leisure and sports activities group. Mr. Oberwager is on the board of RBMedia, an audiobook firm, and Skydance Media, which teamed up with Paramount Pictures on “Top Gun: Maverick,” a Tom Cruise motion drama that generated greater than $1 billion.

Since Simon & Schuster was first put up on the market in 2020, many within the publishing business have fretted over the place the corporate may land. The writer, which is able to have fun its one hundredth anniversary subsequent 12 months, has had greater than seven house owners in its historical past.

A sale to a different writer would imply the brand new administration would perceive the ebook enterprise. But it could additionally imply additional consolidation within the business, with probably fewer gamers obtainable to bid on large books, and the prospect of layoffs as redundant jobs had been eradicated. It might additionally increase regulatory scrutiny: Paramount’s first try and promote Simon & Schuster, to Penguin Random House, was derailed by authorities antitrust issues.

Acquisition by a non-public fairness agency, however, presents its personal dangers. The ruthless facet of that enterprise was immortalized in a 1989 ebook, “Barbarians at the Gate,” which detailed KKR’s acquisition of Nabisco and the burden the deal’s debt left on the corporate.

Gustavo Schwed, a administration professor at New York University’s Stern School of Business, mentioned the sale would enable KKR to put money into a enterprise that was not considered as core by its vendor. But, like all personal fairness deal, the quantity of debt KKR makes use of to finance the acquisition will assist decide the writer’s monetary constraints.

“Sometimes, despite your best intentions, things crash and burn — and the more leverage you use, the more risk there is of that happening,” Mr. Schwed mentioned.

KKR didn’t define its financing plans on Monday. LionTree Advisors and Shearman & Sterling suggested Paramount on the deal.

As a part of the deal, Simon & Schuster workers will obtain an possession stake within the firm, a part of a program KKR developed to enhance engagement amongst those that work within the corporations it buys. The personal fairness agency used this mannequin with RBMedia, which KKR acquired in 2018.

That wager paid off: KKR agreed to sell RBMedia final month to a different funding agency for a considerably increased value. KKR mentioned that beneath its possession RBMedia doubled the dimensions of its audiobook catalog, from over 31,000 to over 66,000 audiobooks.

Since workers had an possession stake within the firm, when RBMedia was offered, those that labored there earned a money payout from the sale value as much as two occasions their wage, KKR mentioned.

In addition to RBMedia, KKR has additionally invested in one other firm within the ebook world: Overdrive, a digital studying platform utilized in libraries and faculties.

Pete Stavros, a co-head of world personal fairness at KKR, mentioned in an interview that the deal would give Simon & Schuster workers the prospect at attaining “a life-impacting amount of wealth.”

Mr. Stavros and Mr. Sarnoff mentioned they noticed alternatives for the writer in worldwide growth and in audiobooks, a major level of progress for the business at giant. Mr. Sarnoff mentioned he didn’t anticipate the deal to have any influence on Simon & Schuster authors.

The street to Monday’s announcement has been lengthy and bumpy.

After Paramount (then known as ViacomCBS) reached an settlement to promote Simon & Schuster to Penguin Random House, the nation’s largest ebook writer, for $2.18 billion, the Biden administration challenged the sale in courtroom. A choose sided with the federal government final 12 months.

Rather than enchantment, Paramount determined to place Simon & Schuster again in the marketplace, obligating Penguin Random House to pay a $200 million termination charge for its bother, on prime of tens of millions in authorized prices.

Since the primary deal crumbled, Simon & Schuster has carried out properly and remained a horny buy. In the primary quarter of 2023, its gross sales rose to $258 million, up 19 % from the prior 12 months. Results at different main publishers, against this, had been disappointing throughout that interval.

Though KKR’s supply for the writer is lower than what Penguin Random House had agreed to pay, the distinction within the value is partially offset by the termination charge paid to Paramount and earnings from the writer. But KKR is a horny purchaser, partially, as a result of it’s unlikely to lift pink flags with regulators.

“Paramount doesn’t want to traipse through another deal that goes bust,” mentioned Erik Gordon, a professor on the University of Michigan Ross School of Business. “It wants to sell the business without more surprises.”