Rupert Murdoch still believes in romance.
The billionaire press baron's publishing company, News Corp., said Friday that it has agreed to purchase Harlequin Enterprises from Canada's Torstar Corp. for about $415 million in cash.
The world's leading publisher of romance novels is expected to be folded into News Corp.'s New York book publishing unit, HarperCollins. Harlequin operations will remain in Toronto. Harlequin publishes the work of about 1,300 authors and churns out 110 titles a month, with such titles as "A Game of Seduction," "Need You Now" and "My Fair Billionaire."
"It's not just about romance — the company has interesting capabilities," said Brian Murray, chief executive of HarperCollins. "They have a very solid business, and while it has declined a little during the last few years, it remains a very profitable business."
News Corp. last year initiated talks with Torstar to buy the Canadian company's romance novel operation that was founded in 1949. Torstar also publishes the Toronto Star.
The publishing giant was interested in Harlequin for several reasons, Murray said. Chief among them was the publisher's presence in stores such as Wal-Mart and its international reach, which should give HarperCollins access to a wider audience and foreign book translators.
The Harlequin deal would give HarperCollins entry to 16 markets where it does not currently have a presence. The romance novels are issued in 34 languages, including Spanish, Japanese, Korean, Chinese, Dutch, Hebrew and Russian. In contrast, nearly all HarperCollins books are published in English.
"This is a transformative transaction for HarperCollins because of the global platform of Harlequin," Murray said. "The readers of romance books are some of the most voracious readers out there, with some reading between 50 and 100 books a year."
Last year, Harlequin generated about $370 million in revenue, about 40% of which came from sales of books published in languages other than English.
News Corp. said the deal will help accelerate both companies' migration to digital books. HarperCollins has seen steady growth in recent years in the publication of books tailored to electronic tablets.
The acquisition is subject to regulatory approval and a vote by Torstar's Class A shareholders. It is expected to be finalized by September.
"This transaction will allow Harlequin to continue to operate as a distinct and successful brand within a larger publishing company," said Craig Swinwood, publisher and chief executive of Harlequin. "We're excited to be able to take full advantage of HarperCollins' robust resources."
Book publishing contributed nearly $1.4 billion, or about 16%, of News Corp.'s $8.9 billion in revenue in its last fiscal year.
"We like the strategic fit, the larger international footprint, and News Corp.'s move into a business with visibly improving margins," Wells Fargo Securities analyst Eric Katz wrote in a research note Friday. He estimated that book publishing could grow to represent a fifth of News Corp.'s annual revenue.
HarperCollins' children's book business has been riding high this year. It publishes the "Divergent" and "Insurgent" books by Veronica Roth. This year, "Divergent" was made into a blockbuster movie distributed by Lionsgate/Summit.
In 2012, News Corp. spent about $200 million to acquire Nashville's Christian book publisher Thomas Nelson from a private equity firm. The company used the acquisition to diversify its operations by launching its HarperCollins Christian Publishing.
The 83-year-old Murdoch, who is chairman of News Corp., and his family control the company with nearly 40% of its voting shares. The company also owns the Wall Street Journal, New York Post, Times of London and newspapers and television properties in Murdoch's native Australia.
News Corp. shares closed up a penny on Friday to $17.31. The company's stock has increased 15% since June 30, when the company was spun off as a stand-alone entity from Murdoch's more profitable Fox entertainment assets, which took the name 21st Century Fox.Copyright © 2014, Los Angeles Times