GoFuckYourself.com - Adult Webmaster Forum - FriendFinder Networks $210mil bid to buy Playboy

July 15, 2010, 4:12 p.m. EDT
Penthouse parent launches rival bid for Playboy
By William Spain, MarketWatch

CHICAGO (MarketWatch) -- Just days after Playboy Enterprises Inc. founder Hugh Hefner moved to take his company private with an offer valued at $184 million, the parent of Penthouse magazine countered with a higher bid Thursday.

FriendFinder Networks Inc. said its $210 million proposal "is in the best interest of Playboy Enterprises and its stockholders, providing a basis for future growth of the Playboy brand and enhancing the Playboy legacy."

FriendFinder added that it has more than 200,000 affiliates in its network and "maintains one of the world's largest Internet affiliate programs, providing the Playboy (NYSE:PLA) brand the ability to help extend its global reach."

In a statement announcing the offer, Marc Bell, the chief executive, said he is "very excited about the prospect for the combination of Playboy Enterprises and FriendFinder Networks. ... We look forward to Mr. Hefner and other key members of management being an integral part of the combined companies."

In its own statement, Playboy acknowledged that it had received the FriendFinder offer and that its board "will give it appropriate consideration."

On Monday, Hefner offered to take the adult-entertainment company private for $5.50 a share. The same day, Bell said that FriendFinder also was interested and was preparing its own offer.

Hefner, who founded Playboy in 1953 and took it public in 1971, said in a letter to the company's board of directors that he is "not interested in any sale or merger, selling shares to any third party or entering into discussions with any other financial sponsor."

He already owns 69.5% of the company's Class A common stock and 27.7% of its Class B shares.

Shares of Playboy closed with a gain of a penny at $5.52 Thursday afternoon. On the day of Hefner's offer, they jumped 40% to their highest level in more than two years.

The money-losing company recently announced a restructuring that it labeled an effort to "transition Playboy to a brand-management company." That move would see it shed jobs as it outsources many of its traditional media functions.

Playboy has been under pressure for years as a result of the slump in magazine circulation and advertising and the explosion of adult content available free online. Even the licensing of its iconic brand, once a steady growth driver, has slowed.

In December 2008, Hefner's daughter, Christie, stepped down as chief executive after years of near-constant losses and steadily dwindling revenue in nearly all Playboy divisions. In 2006, the company's revenue stood at $331 million, down form $347 million in 1999. By last year, the figure had slumped to $240 million.

The flagship magazine's circulation peaked at 7.1 million in late 1972. By last year, it was down to 2.6 million, and in October Playboy cut that figure to 1.5 million, where it stands now.

First published in the United Kingdom in 1965, Penthouse magazine's U.S. edition boasted circulation of 1 million by 1971 and reached parity with archrival Playboy at 4.5 million six years later. By 2002, that figure had declined to 650,000 and today it is about 250,000.

"Sex still does not sell [enough]," Egan-Jones Ratings Co. wrote in a note to investors. "Regardless of the winner, creditors are likely to be losers given that leverage is likely to remain high."

Playboy "has exhibited marginal credit quality over the past several quarters" and "remains weak," Egan-Jones said.