Playboy, like Hef’s sex life, better off private

January 10, 2011

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

NEW YORK — Some things, like Playboy founder Hugh Hefner’s sex life, are best kept behind closed doors. So it is with the massive restructuring of the media business built on Hef’s nudie magazine. Playboy may be iconic — but its future is bleak. So while the newly engaged octogenarian is still having his way with shareholders in his latest low-ball bid, they might as well take his money.

Still, don’t be fooled by Hef’s $6.50 a share offer for Playboy. The extra $1 he pulled out from under his smoking jacket simply reflects the increase in stock prices since his July tilt. The S&P 500 Index is up 18 percent — and so is Hef’s bid. So any pretense that he has sweetened the deal to woo investors into his boudoir is balderdash.

Moreover, Hef’s deal values the equity at around $200 million. That’s just over six times this year’s EBITDA and only four times projected EBITDA next year, according to consensus estimates compiled by Thomson Reuters. So there’s a case to be made for shareholder resistance.

But they’d need a brass set of you know what. It isn’t just that the magazine business has lost its footing with advertisers. The peddling of pornography has changed dramatically and left Playboy’s trademark tamer approach in trouble. The company is at a decisive crossroads: it must decide whether to go for broke in the titillation department or become a brand business. Either route is fraught with danger.

In any event, resistance is futile. With 70 percent of Playboy’s voting shares, Hef has investors’ hands tied. And he made abundantly clear he would not entertain rival offers. Hef may need 90 percent of shareholders to play along, but between him and Plainfield Asset Management’s 19.05 percent of the voting stock, he’s basically there.

Minority shareholders may understandably feel coerced. But having invested knowing full well the man’s reputation for getting what he desires, they only have themselves to blame.

Comments

Please keep this kind of news out of my inbox. Don’t you have more important things to write about than this known-sexist?

Posted by Mdgelly | Report as abusive
 

Way to go Hef!

We should all, in our 80′s, be staring down investors and playing the market; having multiple girlfriends, all stunners; living in mansions in Chicago and LA and basically living it up. He did it his way – ya gotta admire that.

Posted by Gotthardbahn | Report as abusive
 

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