A New Home For Independent Publishers
Many independent U.S. book publishers breathed a sigh of relief after a Delaware bankruptcy court ruled in favor of the Perseus Books Group taking control of the distribution contracts for more than 120 clients of the now-defunct Publishers Group West (PGW).
The New York-based Perseus Books offered to pay
70 cents for every dollar of pre-bankruptcy claims owed to publishers who were distributed under PGW, a Berkeley, Calif.-based division of Advanced Marketing Services (AMS). The bid to help bail out AMS from a pile of debt claims was approved by Judge Christopher Sontchi Feb. 19.
Perseus President David Steinberger says the company began shipping books for the former PGW clients on March 1. The companies started to receive payments on the same day.
“Our mission as an organization is to enable independent publishers to succeed,” he says. “Whether those publishers are publishers that we own, like Basic Books, or whether they’re joint-venture partners, like Public Affairs, or independent clients, like Harvard Business School Press. … So when PGW clients ended up caught in this AMS bankruptcy, it wasn’t in the original plan of ours to look at an acquisition in this area, but we began to think, ‘Is there some opportunity here for us to step in and maybe provide a solution. ...’”
PGW’s parent company, the San Diego-based AMS, declared bankruptcy on Dec. 29, 2006, leaving its publishers without fourth-quarter payments or a means of distributing titles. Steinberger says the company started working on a deal almost immediately after AMS’s bankruptcy announcement came.
“We started having conversations the day it happened, internally,” he says. “We began to talk … about whether there was some way we could work together to come up with a solution here. ...”
In early January, Perseus began discussions with AMS.
“We came up with a pretty unorthodox design, not to buy PGW, but to pay debts that PGW owed to PGW clients that had been cut off by the bankruptcy,” he says. “We would pay a portion of those debts, and in exchange we asked PGW clients to agree to have their agreements assigned to us. It relieved a huge claim from the bankrupted company.”
Steinberger says the company is now in a five-month transition services agreement that runs until July 31.
“During that period, we are going to continue to operate PGW,” he says. “… We’re going to think through how best to organize the combined company.”
Perseus made the offer to all PGW clients. In the end, 124 publishers came onboard, a group representing 85 percent of PGW client revenue.
A bidding battle between Perseus and Rowman & Littlefield Publishing Group’s National Book Network began after AMS declared Chapter 11. Although National Book Network was offering to pay 85 cents on the dollar, AMS and its creditor committee publicly supported Perseus’ offer.
“We were really gratified with the response publishers gave us,” he says. “What many publishers said to us was, ‘The most important decision here is who is my long-term distribution partner. Who’s going to best represent my books and authors? That’s more important to me than getting an extra 15 cents on the dollar.’”
Perseus’ offer in total was approximately $20 million, Steinberger says.
As part of the deal, the publishers agreed to extend their existing contracts for four years.
With its acquisition of Client Distribution Service (CDS) in April 2005, Perseus, once an imprint of HarperCollins, gained its own distribution capabilities. The acquisition also gave the company a relationship with independent publishers who were clients of CDS. In August 2006, Perseus acquired another independent distributor, Consortium Book Sales and Distribution.
“We’re really trying to be the home for independent publishers,” Steinberger says of Perseus. “We have a very exciting mission. It’s also a very challenging mission. We’re trying to create a place in the market for independent publishing, and it’s a market that’s very much dominated by media conglomerates. Our goal is to enable the independent publisher to be entrepreneurial and to be creative, and to have control over his or her own destiny, but with the support of an organization that has real scale and … that really enables that publisher to succeed.” BB