NEW YORK -- Simon & Schuster's corporate parent has officially ended the agreement for Penguin Random House to purchase the publisher, a proposed sale a federal judge already had blocked last month.
Paramount Global also announced Monday that it still plans to sell Simon & Schuster, a nearly century-old company where authors include Stephen King, Colleen Hoover and Bob Woodward.
"Simon & Schuster remains a non-core asset to Paramount, as was determined in early 2020 when Paramount conducted a strategic review of its assets," Paramount announced. "Simon & Schuster is a highly valuable business with a recent record of strong performance, however it is not video-based and therefore does not fit strategically within Paramount's broader portfolio."
Penguin Random House, which had planned to appeal the decision, issued a statement Monday saying it remained convinced it would have been "the best home for Simon & Schuster's employees and authors."
"However, we have to accept Paramount's decision not to move forward," the publisher's statement reads.
The deal was already in peril after a federal judge last month blocked the sale from going forward on antitrust grounds. Penguin Random House had said it planned to appeal the decision. But it could only do so if Paramount Global agreed to extend the deal, which expires today.
The collapse of the $2.175 billion sale is a blow to Penguin Random House's ambitions to expand its market share, and an expensive one. In addition to the legal cost of fighting the Justice Department in court, Penguin Random House will have to pay Paramount a termination fee of about $200 million.
Paramount decided not to proceed with the merger after concluding that it wasn't worth challenging the Justice Department in court, according to a person familiar with the company's strategy. Simon & Schuster's improved financial performance gives Paramount options should it choose to put it back on the market.
Paramount's decision not to go forward with an appeal was earlier reported by Reuters.
When the deal was announced in 2020, most of the publishing industry assumed the government would approve it, further cementing Penguin Random House's status as the largest publisher in the United States. But the Justice Department last year sought to block it, arguing that the merger would result in less competition for books, and would drive down authors' advances, particularly authors of books that were expected to be top sellers.
Penguin Random House argued that a merger would give more authors access to its distribution network, and that efficiencies created by combining the two companies would allow it to pay authors more.
The judge, Florence Pan, sided with the Justice Department, writing in her opinion that the "government has presented a compelling case that predicts substantial harm to competition as a result of the proposed merger of PRH and S&S."
It was a victory for the Justice Department, which has taken a stance against corporate consolidation. Judges have ruled against the government in several of its challenges.
Penguin Random House called the judge's decision "an unfortunate setback for readers and authors," and said it planned to immediately request an expedited appeal. In a letter to employees, Jonathan Karp, Simon & Schuster's chief executive officer, sought to reassure his staff. "Despite this news, our company continues to thrive," he wrote. "We are more successful and valuable today than we have ever been."
Paramount's decision to exit the deal rather than extend it and seek an appeal means that Simon & Schuster once again faces an uncertain future. The company has posted record results in recent quarters, with sales rising nearly 20% in the first nine months of 2022, even as some publishers have posted lackluster results.
Information for this article was contributed by Alexandra Alter, Elizabeth A. Harris and Benjamin Mullin of The New York Times and Hillel Italie of The Associated Press.