Penguin Buys 45% of Brazil’s Companhia das Letras

In a unprecedented move in the Brazilian book industry and in Penguin’s history, the British publishing company acquired 45% of Companhia das Letras, a renowned publishing house based in São Paulo, for an undisclosed sum. The acquisition puts Companhia das Letras in a privileged position, allowing it to expand its catalogue and make further advances into the digital market. At the same time, it strengths Pearson — Penguin’s owner and the world’ largest educational services group — in Brazil.

This is the first time an Anglo-Saxon publishing company has acquired a stake in a Brazilian book trade company.

The owners of Companhia das Letras will remain in control, through the creation of a holding company which will own 55% of the shares. Luiz Schwarcz and Lilia Moritz Schwarcz, the company’s founders, will control approximately two thirds of this holding company, while Fernando Moreira Salles, the other partner, will control the other third. According to Luiz Schwarcz, Companhia das Letras’ president, Elisa Braga and Maria Emília Bender — both directors at Companhia — have sold their shares in the Brazilian company, but will remain in their positions.

This is the first time an Anglo-Saxon publishing company has acquired a stake in a Brazilian book trade company.

The partnership between the two companies happens almost two years after the launch of Penguin Companhia, a Brazilian imprint which publishes classic titles from both houses. The acquisition also comes after a little more than one year after Pearson spent 326 million pounds to buy private school learning systems from SEB Brazil, a move that turned it into one of the leading educational groups in Brazil.

In a press conference on Monday, Schwarcz said the association with Penguin provides Companhia das Letras access to titles from various imprints of the British company, and will advance its digitization program. “Penguin is the most traditional company in terms of literary publishing, and the most modern in terms of management and technology,” he said. The new company will also be “a privileged channel to introduce Brazilian authors” to the English group. “We hope the opportunities to publish Brazilian classics and new authors outside Brazil will grow.”

Another advantage of the partnership is the synergy with the educational market. Until the middle of 2010, Pearson in Brazil sold only language learning and higher education titles, but its recent acquisitions of learning systems gave the group a complete range of products at all educational levels. In the association with Companhia das Letras, Pearson, on one hand, will have access to the Brazilian company’s authors to develop new products. Companhia, on the other hand, will have access to the channels opened by Pearson with schools. Lilia Schwarz, partner in Companhia, is a renowned history and anthropology professor, and will be in charge of looking closely at the educational market on behalf of the company, together with Pearson’s regional team.

John Makinson, Penguin’s CEO, said the 45% acquisition of Companhia das Letras was the company’s first investment in a publishing house outside the group and in a non-English speaking market. “Our philosophy is to invest internally, in our authors, employees. So why invest in Companhia and why Brazil?” The answer, he said, is that Brazil offered many growth opportunities and had “one of the most advanced and sophisticate publishing markets in the world,” and together with India and China, is a key emerging publishing market.

According to Makinson, Penguin’s relationship with other Brazilian publishing houses won’t change, and Companhia won’t be given preference in right deals. But he stressed that it is likely that rights sales to Companhia will increase. “As we create synergy, this is a natural path,” said Schwarcz, “the partnership has to be good for both parts.”

Schwarcz didn’t reveal details about what plans Companhia has for the digital market. He said Fabio Uehara, the executive responsible for the digital segment at the company, has spent three days at Penguin in United States to learn how it is distributing and promoting e-books. Schwarcz didn’t make predictions on how much the educational segment will represent to Companhia das Letras in the following years. “Schools have always adopted our books, but we can not estimate how much these sales represent.”

In the last decade, many foreign publishing groups have invested in Brazil. In 2001, Spanish group Santillana bought Moderna, focused in the learning segment, and also Objetiva, in the trade business. Thomas Nelson has created a joint-venture with Ediouro in order to publish religious books in Brazil. Other companies, such as Portuguese LeYa and Babel, have established their own operations in the trade market, and LeYa is also investing in the learning business. Spanish SM has started a greenfield subsidiary in the country and, in the past months, Oxford University has been hiring people to create an editorial team in Brazil in order to explore the learning books sector.

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