Two of the most renowned publishing brands in the world, Penguin and Random House, have announced a deal to join forces and form a new combined entity, Penguin Random House. The announcement on Penguin's website touted the alliance as a fitting match, citing a strong Random House presence in the established U.S. and U.K. markets. Penguin, for its part, offers exposure to developing markets.

The newly formed organization also expects to benefit from synergies including "shared resources such as warehousing, distribution, printing, and central functions," and will allow the company to expand more into digital publishing, an area with massive growth potential.

Penguin, which had sales of $1 billion last year, is a part of Pearson PLC (NYSE:PSO); Random House (revenues of $1.7 billion) is a division of Bertelsmann. Pearson will own 47% of the new venture and nominate four members to the board of directors, while Bertelsmann will own 53% of Penguin Random House and nominate five directors.

The deal is expected to complete in the second half of 2013. Five years after the deal is finished, either partner can require a Penguin Random House IPO.

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