With the upsurge in popularity of electronic books and shrinking print market, Pearson Plc has joined hands with Bertelsmann SE's Random House. The new merged entity, Penguin Random House, would be 53% owned by Guetersloh, Germany-based Bertelsmann and rest will be owned by London-based Pearson.

The news has been confirmed by both the companies. As far as the new venture is concerned, Markus Dohle, CEO of Random House, will be Chief Executive Officer and Penguin CEO John Makinson will be its chairman.

"Pearson through this structure is not able to totally divorce itself from the risk, but probably this is as good a deal as they could hope to get", said Claudio Aspesi, an analyst at Sanford C. Bernstein Ltd in London. "Penguin was always going to be a drag on organic growth, no matter what".

Both the companies had combined sales of about £2.5 billion with operating profit of £272 million last year. It is reported that this joint venture would be able to cut down publishers' estimated combined cost base of £2 billion by
2-3%.

It has been of lately discussed that emergency of ebooks has affected the industry a lot, thereby making it more susceptible to piracy. With the news hitting the market, Pearson fell 0.7% to 1,213 pence at 12.21pm in London.