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They Can’t Make Good On an IP, But Penthouse Parent Makes $210M Offer for Playboy

Chicago – from — Just days after founder Hugh Hefner moved to take Playboy Enterprises private with an offer that valued the company at $184 million, the parent of Penthouse magazine countered with a higher bid Thursday.

FriendFinder Networks Inc. said its $210 million proposal “is in the best interest of Playboy Enterprises and its stockholders, providing a basis for future growth of the Playboy brand and enhancing the Playboy legacy.”

It noted that it has more than 200,000 affiliates in its network and “maintains one of the world’s largest Internet affiliate programs, providing the Playboy brand the ability to help extend its global reach.”

In a written announcement of the offer, Marc Bell [pictured], the chief executive, said that he is “very excited about the prospect for the combination of Playboy Enterprises and FriendFinder Networks.” Added Bell: “We look forward to Mr. Hefner and other key members of management being an integral part of the combined companies.”

On Monday, Hefner offered to take the adult-entertainment company private for $5.50 a share. The same day, Bell said that FriendFinder was also interested and was preparing its own offer.

Hefner, who founded Playboy in 1953 and took it public in 1971, said in a letter to the company’s board of directors that he is “not interested in any sale or merger, selling shares to any third party or entering into discussions with any other financial sponsor.”

He already owns 69.5% of the company’s Class A common stock and 27.7% of its Class B shares.

Shares of Playboy were up about 1% at $5.55 in Thursday midday trades. On the day of Hefner’s offer, they jumped 40% to their highest level in more than two years.

The money-losing company recently announced a restructuring that it labeled an effort to “transition Playboy to a brand-management company.”

That move would see it shed jobs as it outsources many of its traditional media functions.

Playboy has been under pressure for years as a result of the slump in magazine circulation and advertising and the explosion of adult content available free online. Even licensing its iconic brand, once a steady growth driver, has slowed.

In December 2008, Hefner’s daughter, Christie, stepped down as chief executive after years of near-constant losses and steadily dwindling revenue in nearly all Playboy divisions. In 2006, the company’s revenue stood at $331 million, down form $347 million in 1999. By last year, the figure had slumped to $240 million. Slide show: Playboy pictorial: Hef’s history at the helm.

The flagship magazine’s circulation peaked at 7.1 million in late 1972. By last year, it was down to 2.6 million, and in October Playboy cut that figure to 1.5 million, where it stands now.

First published in the U.K. in 1965, Penthouse magazine’s U.S. edition boasted 1 million subscribers by 1971 and reached parity with archrival Playboy at 4.5 million six years later. By 2002, that figure had declined to 650,000. Today Penthouse’s U.S. edition has 250,000 subscribers.


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