Playboy Enterprises stock surged nearly 44% Monday after founder Hugh Hefner made a proposal to take the men's entertainment icon he created more than 50 years ago private.
Playboy stock was up by as much as $1.72 each (43.7%) to $5.66 per share earlier Monday on news that founder Hefner offered to take the men's entertainment icon private at $5.50 per share. The stock closed at $5.55 each Monday, up 41%, or $1.61 per share.
Hefner, who founded Playboy in 1953, has teamed with Brimingham, Mich.-based private equity fund Rizvi Traverse Management to acquire the outstanding shares he doesn't already own. Hefner owns about 69.5% of Playboy's Class A common stock and 27.7% of its Class B super-voting shares. In a statement, Playboy said it is evaluating the proposal.
Rizvi has made investments in several entertainment properties, including talent agency International Creative Management and Summit Entertainment, the movie studio that has produced the popular Twilight saga films
Although Playboy has grown substantially from the single men's magazine Hefner started in 1953 -- the company now includes adult-oriented pay-per view and premium cable channels and merchandising -- it has been battered by Internet Web sites that offer racier fare at a fraction of the cost. In January 2009 Hefner's daughter Christie resigned as CEO after more than 30 years with the company. She joined Playboy in 1975 and became chairman and CEO in 1988. Last year, Playboy was close to a deal to be acquired by Iconix Brand Group, owner of London Fog and other brands, but that deal was scuttled. In the meantime, Playboy has struggled.
In 2009, revenue fell 17.7% to $240.4 million from $292.1 million. Adjusted cash flow increased 42% to $19.3 million from $13.6 million in 2008, but was still well below the $22.6 million generated in 2007. Domestic TV revenue - which includes Playboy TV, Playboy TV en Espanol and Spice Digital Networks - have been in steady decline over the past few years. Domestic TV revenue dipped 19.3% in 2009 to $50.5 million from $62.6 million in 2008. In 2007, Domestic TV revenue was $75.8 million, according to Playboy's financial reports.
In the past year CEO Scott Flanders has tried to transform Playboy into a licensing company, farming out its bunny logo for consumer products, location-based entertainment and marketing events. And in the fourth quarter, PEI initiated a restructuring program aimed at downsizing the company (it laid off about 26 workers), outsourcing magazine printing to AMI and canceling some property leases. While there has been some success - first quarter licensing revenue was up 6.5% to $9.9 million from $9.3 million in the prior year and net losses were pared to about $1 million from a loss of $13.7 million in 2008 - the company has yet to return to its former glory.
Hefner has told the company he neither plans to sell his shares to a third party nor take on another financial partner, according to a statement. However, that hasn't discouraged other suitors. According to The Wall Street Journal, FriendFinder Networks, the parent of rival men's magazine Penthouse, is planning to make an offer.
In a brief interview Monday, FriendFinder Networks CEO Marc Bell confirmed that the company plans to make a bid shortly.
"They [Playboy] have been on our radar screen," Bell said. "We're looking at it and [you should] expect to see something from us soon."