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Hefner vies for control of Playboy as Penthouse prepares to pounce

Hugh Hefner, the famous lothario and founder of Playboy magazine, was last night fighting to keep control of the business empire he created more than five decades ago.

Hours after the iconic impresario offered to take Playboy Enterprises private in a $185m (£123m) takeover deal, the owners of rival Penthouse magazine said they would launch a higher bid, setting the scene for a battle between the two titans of soft porn. In a thunderous letter to the board of Playboy, the 84-year-old Mr Hefner, who is still the company's "editor in chief and chief creative officer", vowed not to sell his controlling stake to anyone. Instead, he planned to offer to buy the 30.5 per cent of the company he does not own, out of concern for the brand, the editorial direction of the magazine and his personal legacy.

A Michigan-based private-equity firm called Rizvi Traverse Management has agreed to finance Mr Hefner's bid. At $5.50 (£3.66) per share, the offer values Playboy at a 40 per cent premium to its stock-market price last week.

Playboy shares surged twice yesterday, first in response to news of Mr Hefner's offer and then when it was reported that the owners of Penthouse, FriendFinder Networks, were planning a counter-bid, which could be tabled overnight. FriendFinder's chief executive Marc Bell said Mr Hefner's offer "dramatically" undervalues Playboy.

Mr Hefner launched Playboy in 1953 with Marilyn Monroe on the cover, and last month 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.

The magazine, too, has suffered from falling sales, scaling back publication from 12 issues to 10 per year. Overall, the company has lost more than $200m (£133m) in two years, and its revenues fell by 17 per cent last year.

Christie Hefner, the founder's daughter, who had been chief executive of the company for two decades, quit late in 2008 and her replacement, Scott Flanders, has been examining ways to hitch the brand to new licensing ventures. He has also been cutting costs, and said last month that redundancies had saved the company $3m (£2m) annually.

The company has also pursued talks to sell itself to Iconix Brand Group, a company that licenses clothing brands such as Joe Boxer, but opposition from Mr Hefner is believed to have been an obstacle to a deal.

The Playboy board, which is chaired by David Chemerow, an executive of the media measurement firm Rentrak, said it would form an independent committee to examine Mr Hefner's bid when it is formally tabled.