March 29, 2020

Amazon to Buy Goodreads

With bookstores closing, Internet sites have become critical places for telling readers about books they might be interested in. This deal further consolidates Amazon’s power to determine which authors get exposure for their work.

Until the purchase, Goodreads was a rival to Amazon as a place for discovering books. Goodreads, which is based on networks of friends sharing reviews, was building a reputation as a reliably independent source of recommendations. It was also of great interest to publishers because members routinely shared their lists of books to be read.

By contrast, Amazon had several well-publicized cases involving writers buying or manipulating their reviews on its site. As a result, authors said Amazon was deleting reviews from its site at the end of 2012 as a way of cracking down.

The deal is made more significant because Amazon already owned part or all of Goodreads’ competitors, Shelfari and LibraryThing. It bought Shelfari in 2008. It also owns a portion of LibraryThing as a result of buying companies that already owned a stake in the site. Both are much smaller and have grown much more slowly than Goodreads.

Otis Chandler, a founder of Goodreads, said his management team would remain in place to guard the reviewing process that had made the site attractive to its 16 million members. “Amazon has a real history of building independent brands and running them as independent companies,” he said in a phone interview.

Reaction online, however, was swift and laced with skepticism. “Say hello to a world in which Amazon targets you based on your Goodreads reviews,” Edward Champion, a writer and editor, posted on Twitter. “No company should have this power.”

The deal did get some support from Hugh Howey, whose book “Wool” was originally self-published on Amazon and promoted through Goodreads and became a best seller. “The best place to discuss books is joining up with the best place to buy books — to-be-read piles everywhere must be groaning in anticipation,” he said in the companies’ news release.

Russ Grandinetti, Amazon’s vice president for Kindle content, said the integration of the companies was beneficial. For example, it will make it “super easy,” he said, for authors that self-publish through Kindle “to promote their books on Goodreads.”

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DealBook: Tyco to Split Itself in 3, Hoping for More Value

TycoDaniel Acker/Bloomberg News Tyco wants to separate its North American residential alarm system unit, its flow control group and its commercial security business.

8:40 p.m. | Updated

For the second time in less than a decade, Tyco International will break itself into three companies, seeking to improve gains for its shareholders and possibly pave the way for those pieces to be acquired later.

The plan announced on Monday represents a further unwinding of a once-sprawling empire with a troubled history, one that led to the downfall of its former chief executive, L. Dennis Kozlowski.

Over the next 12 months, Tyco plans to split into three publicly traded businesses: its ADT home alarm unit, which is expected to have $3 billion in annual revenue; its flow control group, which makes valves and pipes and has an expected $4 billion in annual revenue; and a commercial fire and security unit, with about $10 billion in annual revenue.

“We firmly believe that these businesses can best achieve their full potential as stand-alone, independent companies rather than under the current Tyco structure,” Edward D. Breen, Tyco’s chief executive, said in a conference call with analysts.

Shareholders appeared to approve of the plan, pushing Tyco shares up 2.4 percent to $44.75.

Other diversified companies have sought growth by breaking themselves apart, including ConocoPhillips, McGraw-Hill and Kraft Foods. More than a dozen companies have disclosed plans to spin off units this year.

Behind the wave of corporate break-ups is the argument that the varied businesses of conglomerates obscure each division’s true value. Creating smaller, more focused companies will bolster each piece’s individual value, according to this view.

Analysts with FBR Capital Markets estimate, for example, that Tyco’s base sum of its parts is $52 to $56 a share.

In many ways, the plan continues a strategy that Mr. Breen has considered for many of his nine years atop Tyco.

Under Mr. Kozlowski, Tyco embarked on an aggressive buying spree. But the company began running up losses in a variety of operations, and Mr. Kozlowski later became embroiled in scandal over his compensation package, leading to a trial and his conviction.

Brought to the company after the departure of Mr. Kozlowski, Mr. Breen spearheaded the company’s 2007 break-up, which created Tyco International, as well as Tyco Electronics and a health company called Covidien. (In 2002, it split off its finance arm, which became the CIT Group.)

Even in 2007, Mr. Breen said in a call with analysts on Monday, he had pondered an even more ambitious unwinding of Tyco. But one of his top goals was to ensure that each unit could survive or thrive on its own.

“They were very fragmented at the time,” Mr. Breen said. Now, he added, “when you just sit back, the businesses are all performing well.”

Since then, Tyco has bulked up each of its remaining businesses through a mix of acquisitions and organic growth. It purchased Broadview Security, the operating name of Brink’s Home Security Holdings, for $1.9 billion last year, uniting two of the biggest names in home and commercial protection.

Analysts today largely agree with Mr. Breen’s assessment. “In contrast to other conglomerate separations in the past, all three of Tyco’s businesses are attractive assets with leading market positions,” John G. Inch, an analyst at Bank of America Merrill Lynch, wrote in a research note on Monday.

Tyco’s management emphasized that each division could then grow through acquisitions, using their new stocks as deal currency. At the same time, each could also become an attractive takeover target for bigger industrial companies, like United Technologies — which is said to be exploring a potential takeover of Goodrich — or Honeywell International.

Earlier this year, the French conglomerate Schneider Electric approached Tyco about a potential takeover, people briefed on the matter said previously. But such a deal would have been highly expensive, and Schneider quickly abandoned the effort after reports of the discussions surfaced. Tyco also plans to spread its corporate debt — about $4.1 billion in long-term obligations as of June — across the three spun-out businesses. That contrasts with many break-up plans, in which much of the corporate debt is piled onto one of the divisions.

Once public, each division will be led by its current president and management team.

Mr. Breen will remain involved in each of the Tyco businesses, serving as the nonexecutive chairman of the commercial protection company; director of the flow control unit; and a consultant to ADT.

As with many other corporate break-ups, the plan will be tax-free for Tyco shareholders, who will receive stock in each of the three units. That proved more attractive than selling off divisions, which would have incurred big tax hits for shareholders.

Tyco was advised by Goldman Sachs, Lazard and the law firm Simpson Thacher Bartlett.

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