Private lessons for shareholders as the Hef delists Playboy

By Emma Haslett Tuesday, 11 January 2011

After 60 years as a public company, Hugh Hefner has full control of his empire again. But he's going to have to work hard to save it from the effects of the digital era.

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Media & entertainment

For a man famed for living in a house with a bevy of nubile young ‘bunnies’, the word ‘private’ has never meant much to Playboy founder and editor-in-chief Hugh Hefner. But that’s about to change: the octogenarian tycoon has just sealed a deal to buy his empire back off its shareholders, taking the company private after nearly 60 years as a public company. The Hef is apparently going to pay $6.15 (£3.95) a share, valuing the company at $207m. That’s less than in its 70s heyday – but times have changed…

The Hef, who already owns more than 60% of the business, had originally made an offer of $5.50. But then publisher FriendFinder, which publishes rival 'special-interest' mag Penthouse, joined the party, bidding $6.25 a share. The eagle-eyed among you may have spotted that the Hef’s winning offer is still lower than the Penthouse bid – but then again, the tycoon does own almost 70% of the voting rights on Class A shares and 27.7% on Class B shares. So he’d have been difficult to argue with.

The remaining shareholders are, understandably, not happy. In the long-term, though, it may prove to be a narrow escape for FriendFinder. Since the dawn of the digital era, when chaps everywhere no longer had to endure the embarrassment of a secret trip to their newsagent’s top shelf, Playboy has been struggling to keep up. Having hit a record circulation of 7.2m in 1972, the company reported a quarterly loss of $27.4m in 2009, and in 2010 it cut its circulation by more than a third to just 1.63m – scantier than its models’ bikinis.

When the company floated in 1971, Playboy was still a pretty hot investment. The exact mathematics of the situation are complicated, but by the LA Times’ calculations, if there are still any original shareholders remaining, they’ll have lost 48% of their original investment. And that’s without any adjustment for inflation. Quite a fall from grace. Now he’s responsible for its destiny, if the Hef wants to save his ailing company, he’s going to have to pull a pretty impressive rabbit (or bunny) out of his hat, sharpish…