Random House, the publishing arm of German media group Bertelsmann, has announced that it is to combine its business with that of Pearson’s Penguin.
The combined entity will be known as Penguin Random House will be 53% owned by Bertelsmann with the remainder owned by Random House.
Marjorie Scardino, Pearson's outgoing chief executive, said: "Penguin is a successful, highly-respected and much-loved part of Pearson. 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."
The bid could arouse the attentions of the Competition Commission however as the deal will give Penguin Random House a 25% market share of global English language books, with annual revenues of around £2.5bn.
Pearson has been seeking a clean break from book publishing in a bid to focus on its education arm, which now accounts for four fifths of its turnover.
Both groups hope that a deal can be done in the first half of 2013.