Few media brands have been as storied or durable as Playboy, which went from defining the sexually curious male of the 1950s, to chronicling the good life of the 1970s, to being another casualty of the Internet Age. So when founder Hugh Hefner on July 12 made public an offer to pay $123 million for the shares of ailing Playboy Enterprises (PLA) that he does not already own, a more than 30 percent premium, he and his private equity backers at Rizvi Traverse Management likely thought they would receive a hero's welcome.
Hardly. Hefner and Playboy management have been hit with a shareholder suit claiming that any sale to the founder—just as new management is trying to revive Playboy's fortunes—wouldn't maximize shareholder value. To complicate matters, FriendFinder Networks, which owns rival men's magazine Penthouse as well as adult websites, quickly announced it is preparing a competing bid for Playboy.
FriendFinder Chief Executive Officer Marc Bell, whose company scrapped its initial public offering earlier this year, says it's interested in online content from Playboy, which publishes its namesake men's magazine, creates videos for its website and cable-television networks, and licenses products with its bunny-ear logo.
Playboy said the 84-year-old Hefner, who owns 69.5 percent of Playboy's Class A voting stock and 27.6 percent of the Class B nonvoting shares, isn't interested in a merger or sale to a third party. Hefner wants full control of the Playboy brand and the magazine's editorial direction.
Playboy's impact on American culture is far larger than its price tag. After Hefner founded the company in 1953, Playboy magazine won a following for its satirical cartoons, fiction, and photos of nude women. The first issue of the magazine included photos of Marilyn Monroe, and authors such as Vladimir Nabokov were published in Playboy's pages.
The company expanded around the globe throughout the 1960s and 1970s with Hefner at the helm. It added membership clubs, resorts, and casinos. Playboy went public in 1971; the magazine's circulation peaked in 1972 at 7.2 million. Revenue has fallen for the past two years, and the company has lost more than $200 million. This year the company reduced Playboy magazine's rate base, the newsstand and subscription sales guaranteed to advertisers, to 1.5 million from 2.6 million.
In 2009, the company hired Scott Flanders as CEO to focus more on brand management. Flanders replaced the founder's daughter, Christie Hefner, who had served as CEO for 20 years as her father continued to live in the Playboy mansion and personify the swinger lifestyle. The Los Angeles-area villa, which the company uses for television shows and photo shoots, is "an enormous asset to us," says spokeswoman Martha Lindeman. "It's a huge part of our brand."
Hefner still squires voluptuous young women around the mansion while clad in his trademark silk smoking jacket. Some of the octogenarian's most recent girlfriends star with him in the TV show The Girls Next Door and related online videos. Bell says that if he successfully purchases Playboy, he won't oust Hefner from the mansion. "Our interest is mostly the digital assets," he says. "We have no desire to throw him out."
The bottom line The men's magazine mogul makes a bid to regain his empire and focus its brand after years of decline.