Playboy Going Private in Hefner-Backed Buyout


For more than a year, adult entertainment company Playboy Enterprises (PLA) has been looking for someone, anyone, to save it, but in the end, its savior came from within. Last July, founder Hugh Hefner offered to take Playboy private, and Monday, the company finally announced it has agreed to be bought out by Icon Acquisition Holdings, which is controlled by Hefner, for $6.15 per share.

The $6.15 price represents a 18.3% premium over Friday's closing price of $5.20 and a 56.1% premium over the closing price on July 9, 2010, the last trading day before the proposal was first announced. Hefner's offer values the company at around $207 million. Sunday night, Playboy's board unanimously approved the agreement and said it would recommend the transaction to the stockholders.

"With the completion of this transaction, Playboy will come full circle, returning to its roots as a private company," said Hefner. "The brand resonates today as clearly as at any time in its 57-year history. I believe this agreement will give us the resources and flexibility to return Playboy to its unique position and to further expand our business around the world."

CEO Scott Flanders will remain with the company in his current position and maintain a significant equity investment in Playboy.

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Hefner, who founded the magazine in 1953 and picked Marilyn Monroe as the first centerfold, controls approximately 69.5% of the Class A (PLA.A) shares and 27.7% of the Class B shares. Under the terms of the agreement, Hefner will buy the stock he doesn't already own of both classes at $6.15 a share, and transfer all shares he already owns to the purchaser. The tender offer should begin no later than Jan. 21, and expire 20 business days after.

Icon Acquisition has obtained equity commitments for the transaction from an affiliate of Rizvi Traverse Management and a debt commitment for the transaction from affiliates of Jefferies & Co. The closing of the transaction is subject to customary conditions, but not to a financing condition, the release stated. The transaction is expected to be completed around the end of the first quarter.

Playboy is one of the most recognized and popular consumer brands in the world, the company says, but it has experienced years of declining sales and earnings. The betting now is that it could operate better as a private company. PLA shares jumped more than 17% in premarket trading Monday to $6.09.

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