Hef Tweets confident on Playboy bid
Hugh Hefner believes a buyout can revitalise the iconic but troubled brand
Thursday 15 July 2010
It has been a busy few days for Hugh Hefner, the octogenarian porn baron, since he offered to buy back full ownership of his Playboy empire – but his followers on Twitter know that the threat of a rival bid from the owners of arch-enemy Penthouse magazine is not disrupting life too much.
"Penthouse is just looking for publicity. They're not in the picture," the lothario tweeted from the Playboy mansion in California that he shares with his bunny-eared female "Playmates". "My interest in taking Playboy private is prompting some crazy rumors. Playboy isn't in play. I'm buying, not selling."
He followed up these blasts with more. "I'm concerned about our minority stock holders & the future of the magazine & the brand," he wrote. Then: "I support my management team & think we're on the road to recovery. Going private should help."
But finally it was back to more pressing matters: "I'll be playing games with the girls tonight, probably dominoes or Uno. Any game with Playmates is fun."
For all the 84-year-old Mr Hefner's nonchalance, it was becoming clear yesterday that his offer for the company will not be a straightforward affair. FriendFinder Networks, the internet company which owns Penthouse, might have been having trouble quickly pulling together a formal counter-bid, but a lawsuit from disgruntled investors was enough to muddy the waters.
The Shareholders Foundation, an investor advocacy group, said it had launched a class action suit in a Delaware court, claiming that the Playboy Enterprises board was preparing to sell the company to Mr Hefner on the cheap.
On Monday, the founder offered $5.50 a share for the roughly two-thirds of Playboy that he doesn't already own. He said he had teamed up with a Michigan private equity firm, Rizvi Traverse Management, which would help fund the $122.5m he needed to find to buy the shares.
Mr Hefner is not on the board, but he remains editor-in-chief of the magazine and chief creative officer of the company and, most importantly, although he does not hold a majority economic interest in Playboy he controls a majority of its voting shares and can therefore block any alternative deal – something he has vowed to do.
Playboy was launched in 1953 with Marilyn Monroe on the cover, and last month Mr Hefner celebrated the 50th anniversary of the nightclub chain bearing the Playboy name, staffed by bunny girls mimicking the logo of the magazine. The company has also expanded into television and, latterly, internet entertainment, but has suffered because of competition from the vast quantities of cheap or free pornography available on the internet. Over the past two years it has lost more than $200m, despite slashing staff and cutting the number of issues of the flagship magazine. Its turnaround rests on licensing the brand for new uses, but efforts have been slow to produce results.
The Playboy board has given no recommendation on the founder's offer, and said it would set up an independent committee to examine a formal proposal when it is actually tabled, but the Shareholders Foundation suit represents a shot across its bows. It accuses members of breaching their fiduciary duty to Playboy's other shareholders. "The plaintiff alleges that the 'Going Private' plan is the product of a flawed process designed to sell Playboy Enterprises to Hefner and Rizvi Traverse on terms detrimental to stockholders," the organisation said.
It pointed out that Playboy shares had been trading at $8.60 as recently as 2008, and were $15 four years ago.
Defending his position, Mr Hefner has released the text of his letter to the board, which had been kept under wraps when the offer was announced. In the letter, he writes: "I believe the proposal will also reinvigorate the company I founded and create a lasting legacy for the Playboy brand, a brand we have all worked hard to establish as one of the most widely recognised and popular brands in the world."
Marc Bell, the chief executive of FriendFinder, last night vowed that he would have a formal offer ready to present today, after twice delaying the announcement and blaming lawyers. He said he expected no difficulty financing a deal. As well as Penthouse, FriendFinder runs a network of more or less hardcore adult sites.
Playboy shares, which on Monday had soared above Mr Hefner's offer price, were yesterday back below as expectations of a serious bidding war subsided. Some investors were selling without even waiting for Mr Hefner and Rizvi to table their bid. One pundit advised investors to "take the bunny and run".
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