Hugh Hefner to take back Playboy

More than 57 years after launching Playboy from his South Side apartment, Hugh Hefner is buying back the bunny. After six months of deliberation, an improved offer to take Chicago-based Playboy Enterprises private at $6.15 a share passed muster with the board, which voted late Sunday in Los Angeles to return the magazine empire to its 84-year-old founder.

The bid represents an 18 percent premium over Friday’s closing price and values the company at about $207 million. Shares jumped 17 percent, to $6.09, after the Monday announcement.

“There’s been a period of uncertainty over the past six months since Hef’s proposal, speculating on how it might unfold,” Chief Executive Scott Flanders told the Tribune on Monday. “There’s a sense of relief that our future direction is now established.”

In July, Hugh Hefner, who has a controlling interest in Playboy, offered $5.50 a share to take the money-losing company private. That bid was subsequently topped by a $210 million offer from FriendFinder Networks, the Florida-based owner of longtime rival Penthouse. With nearly 70 percent of the Class A voting stock, Hefner’s beefed-up offer ultimately swayed the board.

“I think it’s a fair price,” said David Bank, of RBC Capital Markets. “The trade-off for shareholders is the certainty of the payment versus potentially leaving some upside on the table.”

Hefner has funding commitments from Rizvi Traverse Management and Jefferies & Co. The tender offer will be made by Jan. 21, with the deal expected to close near the end of March, pending approval from a majority of minority shareholders, including nonvoting shares, according to the company.

While the deal and an offer to sublease space at the company’s Lake Shore Drive headquarters have fueled speculation that ex-Chicagoan Hefner will consolidate operations on the West Coast, relocation is not imminent, said Flanders.

“I don’t expect any changes of that nature, certainly through 2011,” he said.

Playboy has struggled to stay relevant in the digital age. It saw 2009 revenue decline 18 percent, to $240 million, with a net loss of about $51 million. Earnings for 2010 will be announced next month, with analysts projecting an 11 percent drop in annual revenue, to $213 million, and a net loss of nearly $33 million.

Accounting for less than a fourth of revenue, monthly magazine circulation stands at about 1.6 million, down from more than 7 million during its heyday in the early 1970s.

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