German publisher finding U.S. politics to be good business after signing record book deal with Obamas

Bertelsmann CEO Thomas Rabe says the German publisher is targeting aggressively U.S. expansion. PHOTO: JÖRG CARSTENSEN/ZUMA PRESS
Bertelsmann CEO Thomas Rabe says the German publisher is targeting aggressively U.S. expansion. PHOTO: JÖRG CARSTENSEN/ZUMA PRESS
Penguin Random House pulled off what may be the publishing industry’s biggest deal of 2017 when it won an auction in February for the rights to books by former U.S. President Barack Obama and ex-First Lady Michelle Obama.

Bertelsmann SE, the German publisher that controls Penguin Random House sealed the deal as it pushes aggressively to boost growth in the U.S. It has picked up other U.S. assets in a deal-making binge in recent years and aims to boost revenue in the country to 30% of overall sales by 2020, Chief Executive Thomas Rabe said.

Speaking Tuesday as the company reported results, Mr. Rabe didn’t give further details of the Obama books deal, which was widely reported to have cost $60 million.

“I’m not denying it,” he said of the deal’s value when asked by reporters.

In an interview, Mr. Rabe said the deal came with “the highest advance ever paid in the history of book publishing.”

It was approved at the company’s headquarters in the provincial German town of Gütersloh in less than 24 hours.

“It’s going to make financial sense for both sides,” he said.

For Bertelsmann and other publishers, a recent upsurge in interest in U.S. politics has provided an attractive opportunity.

“The interest in political books is increasing…that’s positive,” Mr. Rabe said.

Penguin Random House’s business imprint, Portfolio, is set to publish Ivanka Trump’s “Women Who Work” at the beginning of May and its Ballantine Books imprint owns the rights to U.S. President Donald Trump’s “The Art of the Deal.”

Bertelsmann is refocusing on the U.S. after years spent figuring out the right amount of U.S. business in its portfolio of education, television, publishing, services and printing operations.

The 2003 merger of its BMG music unit with Sony Corp.’s music division unraveled. In 2004, it sold its New York headquarters for about $425 million. In 2005, it unloaded its stable of U.S. Gruner + Jahr magazines to Meredith Corp.

Lately, it has been bulking up again.

“Think about the €4 billion ($4.3 billion) we invested on M&A since 2011, about half of that went to the U.S. and that will continue to be the case,” Mr. Rabe said. “For the simple reason that the U.S. (is) the most innovative media, services and education market in the world.”

The company recently jumped headlong into online education and training through Relias Learning, targeting the U.S. health-care industry.

It also owns a stake in Udacity, a company that offers online degrees for the technology sector, including one geared toward engineers working on self-driving cars.

The company said separately Tuesday its net profits rose 2.6% in 2016, boosted by strong performance in its digital education and services businesses.

The company is targeting €20 billion in revenue by around 2020, with 30% coming from the U.S. Bertelsmann competes with News Corp, which owns book publisher Harper Collins, as well as Dow Jones & Co., the publisher of The Wall Street Journal.

Bertelsmann runs Penguin Random House—the world’s largest book publisher—as part of a 2012 partnership agreement with Pearson PLC. The British company said in January it wanted to sell its 47% stake.

The company is courting potential minority investors, mainly “long-term funds, including pension funds, family offices and the like,” Mr. Rabe said, adding that there was “plenty of interest” in the U.S. and the U.K.