CHICAGO – Hugh Hefner wants to buy out the portion of the Playboy empire he doesn’t already own in a bet that the iconic brand can still bring in profits even if the ink-on-paper magazine is past its prime.

Hefner, who founded Playboy magazine more than a half-century ago, is apparently not alone in thinking Playboy can keep swinging into the digital age. A few hours after Playboy Enterprises Inc. announced Hefner’s offer Monday, the corporate parent of rival Penthouse magazine said it will also make a bid.

But it does not appear that the silk pajama-clad 84-year-old — who owns about 70 percent of the company’s voting shares and 28 percent of the nonvoting stock — will budge.

Playboy said Hefner made it clear in his buyout proposal that he is not interested in a sale or merger. The company said Hefner expressed concern that selling Playboy could threaten the brand and its legacy. Hefner has instead proposed joining up with a little-known private equity firm, Rizvi Traverse Management LLC, to take Playboy private.

The offer comes as print advertising is in a tailspin and the company has stretched its brand thin trying to wring profits through leasing its famous bunny ears for everything from cigars to slot machines.

Hefner, who serves as Playboy’s editor-in-chief and chief creative officer, is offering $5.50 per share in cash, a nearly 40 percent premium above Friday’s closing stock price of $3.94. Shares of the company gained 41 percent Monday. Based on the number of shares outstanding on April 30, Hefner’s proposal is worth $122.5 million and values the company at about $185 million.

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Playboy, which is headquartered in Chicago, described Hefner’s offer letter as a proposal and said there was no guarantee it would get any formal bid from Hefner. But Playboy said Hefner indicated that Rizvi Traverse has been in touch with “major lenders regarding potential financing” and is “highly confident ample financial resources will be available to complete the transaction.”

The firm declined further comment, and Hefner did not respond to requests for an interview. If the deal goes through, Hefner will have a major turnaround effort on his hands.

The racy magazine that Hefner launched in 1953 had its most popular years in the 1970s. It has struggled to lure readers and advertisers as the Internet supplants print as the top purveyor of adult content. Playboy magazine, which along with its websites generated 44 percent of the company’s $240 million in revenue last year, sold 311 ad pages for its U.S. editions last year, down from 765 in 2000, according to the Publishers Information Bureau.

 


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