By Daniel Hunter

Penguin and Random House are to merge after publisher Pearson says it has agreed a deal with German media group Bertelsmann.

Under the terms of the deal, the two business will be run in a joint venture called Penguin Random House. Bertelsmann will own 53% of the joint venture while Pearson will own 47%.

"Penguin is a successful, highly-respected and much-loved part of Pearson," said Marjorie Scardino, Pearson's chief executive, who is leaving the firm at the end of the year. "This combination with Random House... will greatly enhance its fortunes and its opportunities.

"Together, the two publishers will be able to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers."

Based on recent results, combining the two firms will create a business with annual revenues of about £2.5bn.

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