Money Matters - Simplified

Playboy to go private again

Hefner is expected revive Playboy Club which has been inactive for long. The company also has plans to endorse a wide range of products with its legendary Bunny logo.

Hugh Hefner, who launched the legendary Playboy magazine in 1953 and converted it into a public venture in 1971, is going to buy back the Playboy Enterprises. The deal has been unanimously approved by the board of directors of the media company.

Hefner, 84, raised his earlier offer of $5.50 per share to $6.15 which was accepted by the board “in the best interests of the company’s public stock holders.”

Deal first step in company reconstruction
The price offered by Hefner is an 18 percent premium over the closing price of company’s shares on Friday.

While accepting the challenges the company is poised to face in the coming years, Flanders said, “Being private will enable us to take a three-to-Five year horizon on the transformation we are trying to implement, rather than be burdened by quarterly pressures and challenges inherent in being public.

Hefner said that the deal, offer the “resources and flexibility to return Playboy to its unique position and to further expand our business around the world.”

Hefner, who is the editor-in-chief and chief creative officer of Playboy, holds nearly 70 percent of shares at present.

The deal will allow Hefner and Scott Flanders, chief executive of the company, to pursue strategies to revive the company.

Flanders said their strategy will be to “transform Playboy into a brand management company.”

Company was facing problems
The magazine reached the zenith of popularity in the 1960s and by the 70s it had expanded to films, nightclubs, books, a modeling agency and a host of other products.

But Playboy started losing ground to more vivid publications like Penthouse and Hustler and by the 90s the younger generation began patronizing publications which titillated without being labeled as porn.

The video business of the company also suffered due to the increased competition from television and internet.

The company has suffered $33.8 million of loss in the first nine months of the last year.

New strategy of the company
Hefner is expected revive Playboy Club which has been inactive for long. The company also has plans to endorse a wide range of products with its legendary Bunny logo.

The global licensing business of the company produced more profit in 2010 than the magazine or company’s entertainment division which also produces a reality show called 'The Girls next Door.'

While accepting the challenges the company is poised to face in the coming years, Flanders said, “Being private will enable us to take a three-to-Five year horizon on the transformation we are trying to implement, rather than be burdened by quarterly pressures and challenges inherent in being public.”