What a FriendFinder-Playboy Hook Up Would Look Like

Playboy Enterprise's (PLA) legendary founder, Hugh Hefner, certainly likes youth -- and beauty. But his company looks old and ugly. Playboy has missed the Internet revolution and the result has been a dismal performance for shareholders.

What to do? Well, Hefner has proposed to take Playboy private at $5.50 per share or $185 million.

Making things interesting, FriendFinder Networks, which owns Penthouse magazine, also wants to buy Playboy, and it has offered at least $210 million. The number could change based on due diligence and negotiation.

Public shareholders would rather have the higher price. But Hefner has more power, with about 70% of the voting shares.

A Serious Relationship

From the 1960s to 1970s, Playboy built a media empire and effectively created a global brand, one that's still quite valuable.

FriendFinder, a much newer entity, is a next-generation adult entertainment company. Based on its last Securities and Exchange Commission filing in February (the company had to pull its IPO because of market conditions), it has 245 million members. A majority of these are outside the U.S.

Over the years, FriendFinder has pieced together a variety of online assets, with the flagship website being AdultFriendFinder. This allows people to find companions for some fun in bed. There are variations on the AdultFriendFinder offering, like AsiaFriendFinder.com, IndianFriendFinder.com and SeniorFriendFinder.com. And there are also sites like Cams.com, Millionairemate.com and even Bondage.com.

The result has been a solid business. For the nine months ended Sept. 30, 2010, FriendFinder generated $244.4 million in revenues and $72.5 million in adjusted income from operations. So the company has the wherewithal to finance a deal for Playboy, especially with the help of private equity sponsors.

Keeping the Playboy Mansion

All in all, a deal with FriendFinder would be an ideal way for Playboy to get real online assets. The outcome could even be an eventual IPO, with Playboy as the parent company.

Realizing the brand's value, FriendFinder wants Hefner to continue being a partner in the new operation. Heff would even retain editorial control of his beloved magazine, as well as keep his Playboy Mansion. How many deals involve stuff like this? But then again, for Hefner, this seems to be par for the course.