A new chapter in the 77-year history of book publisher Penguin has been written with a deal to merge the business with rival Random House.
The new venture, which will be called Penguin Random House, will have an estimated one quarter share of the market for English language book sales and generate annual revenues in the region of £2.5 billion.
Penguin's owner Pearson, which also publishes the Financial Times, will have a 47% stake with Random House's German owner Bertelsmann holding the rest.
The deal still requires regulatory clearance and is not expected to be completed until the second half of next year. There is also the possibility that a rival party may derail the partnership, with HarperCollins owner News Corporation reportedly interested in making a £1 billion offer for Penguin.
Unveiling the deal, the two companies said the tie-up will deliver "significant benefits" such as shared resources and a greater level of investment in authors and products than would be possible as standalone firms.
The combined company would be home to writers as diverse as Random House's Jack Reacher creator Lee Child and Fifty Shades Of Grey's EL James and Penguin's long list of classical authors such as Charles Dickens and Jane Austen.
London-based Penguin employs 5,500 people worldwide, with around 950 in the UK. Random House has 5,300 staff globally and last year its sales accounted for just under 15% of the UK market, compared with Penguin's 11%. Penguin is one of the most recognisable brands in the world, having been set up by Allen Lane in 1935.
Pearson's chief executive Dame Marjorie Scardino described Penguin as a "successful, highly-respected and much-loved part" of the company and said Random House was an almost perfect match in terms of Penguin's culture, standards and commitment to publishing excellence.
She said the two publishers will be able to be more adventurous in trying new models in the world of digital books and digital readers.
Bertelsmann will have five directors on the board of the joint venture, with Pearson able to nominate four. John Makinson, currently chairman and chief executive of Penguin, will be chairman, with Random House chief executive Markus Dohle taking the same role in the combined company.