from www.bloomberg.com – Playboy Enterprises Inc. (PLA) founder Hugh M. Hefner acted properly in a $207 million deal that allowed him to take the 58-year-old magazine publisher private, his lawyers argued in a court filing.

Hefner, who founded Playboy in 1953, didn’t violate legal duties to other investors by backing a partnership’s acquisition of all Playboy stock he didn’t already own for $6.15 a share, Hefner’s lawyers said in an unsealed filing in connection with shareholder lawsuits over the deal.

“Mr. Hefner was fully justified in doing the things about which plaintiffs complain as a matter of law,” Hefner’s attorneys said in the Delaware Chancery Court filing, which seeks to have the suits dismissed.

A partnership owned by Hefner and private-equity firm Rizvi Traverse Management LLC took Playboy private in March after more than 84 percent of the company’s minority stockholders tendered their shares, according to court filings. Playboy directors backed the buyout, which provided a 50 percent premium, as being in shareholders’ “best interests,” the filings show.

Some Playboy investors contend they were shortchanged in the buyout and argue Hefner took the company private “at an inadequate price,” according to a 2010 suit filed in state court in Wilmington, Delaware.

The decision by a Playboy board committee to back Hefner’s push to take the company private ended a contest for control with FriendFinder Networks Inc., the owner of Penthouse adult magazine, which said it would offer $210 million for Chicago- based Playboy.
Circulation Drop

Playboy expanded around the globe in the 1960s and 1970s when Hefner ran the company. The company went public in 1971 and circulation reached 7.2 million for one issue in 1972. Hefner, 85, is still the magazine’s editor-in-chief.

The company, which also produces television content and licenses its logo, has seen magazine circulation and revenue drop in recent years. Last year, the company reduced Playboy magazine’s rate base, the total of newsstand and subscription sales guaranteed to advertisers, to 1.5 million from 2.6 million.

Lawyers for Playboy directors said in their own court filing that company officials began considering offers in 2009 in anticipation of $115 million in debt payments that were scheduled to come due in March 2012.

Hefner, who wasn’t serving as a Playboy director when the board considered the going-private deal, didn’t “utilize his controlling interest” in the company to strong-arm executives or other investors into backing the buyout, his lawyers said.

They also said that since Hefner hasn’t served as a Playboy director since 1988, he didn’t owe a legal duty to minority shareholders as part of the deal.

As part of the buyout, Hefner “sold his controlling interest” in Playboy to the partnership, the lawyers noted in the filing. Minority shareholders shouldn’t be able to use that sale to challenge the deal, the attorneys said.

Delaware law gives a controlling shareholder the “discretion as to when to sell his stock and to whom,” the lawyers said.

Rizvi Traverse, with offices in New York and Los Angeles, has more than $3 billion under management, according to the firm’s web site.

The case is In Re Playboy Enterprises Inc. Shareholders Litigation, Consolidated CA No. 5632-VCN, Delaware Chancery Court (Wilmington).