Private lessons for shareholders as the Hef delists Playboy

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.

by Emma Haslett
Last Updated: 12 Jan 2011
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The Hef, who already owns more than 60% of the business, had originally made an offer of $5.50.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…

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