Simon & Schuster can’t sell control of its publishing division to Thomson

Judge blocks Penguin Random House takeover of Simon & Schuster

NEW YORK (AP) A judge has rejected an appeal by Penguin Random House in the battle over how best to use a controlling stake in Simon & Schuster’s book publishing division.

Penguin wants to pay $17.7 billion for the rest of Simon & Schuster, including the imprint Simon & and its publishing operations, which include Simon & Schuster’s American and Canadian divisions.

District Judge Denise Cote in Manhattan on Wednesday said the company can’t sell control of Simon & Schuster to its longtime chief executive officer, Robert Thomson.

“This is not to determine the merits or the value of Simon & Schuster per se,” she said. “It’s to determine if Penguin possesses the information it needs to make the best decision about the acquisition.”

Simon & Schuster, which had no opposition in the appeal, filed for bankruptcy in 2008 after Thomson slashed its workforce by a third when he scaled back marketing efforts around the world. Penguin wants a bigger share of the company.

“Simon & Schuster and Simon & Schuster’s U.S. division are best served by Simon & Schuster remaining independent,” Cote wrote in Wednesday’s decision.

She concluded, however, that this was not an appeal over “the value of the business, but where is the information that gives the two companies that are making this appeal such value.”

Cote had said she was not convinced Penguin had not obtained relevant information to the effect that Simon & Schuster was in financial distress and that the company had an operating plan for reorganization that would pay it what it is owed.

Penguin’s lawyer, Steven Brill, had told Cote on Wednesday that he believes Cote’s ruling was flawed. He said he does not believe his client has “all the facts” on the company’s financial position.

The company, which acquired Simon & Schuster in 1998 for $400 million, argued Penguin should be required to pay nothing for the rest of the company because it does not own any of the books it sells.

“In addition, Penguin does not know its customers and has no idea of its business strategy,” Brill told reporters. “This is not a case where you want to buy a building.”

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