Fusion Corporate Partners

Friend Finder Network has made a proposal to acquire Playboy Enterprises for $210 million.  FriendFinder Networks is the parent company of Penthouse and one of the leading internet-based social networking companies. FrienFinder owns over 30,000 web sites. 

Marc Bell, FriendFinder Networks’ Chief Executive Officer, says, “We are very excited about the prospect for the combination of Playboy Enterprises and FriendFinder Networks. We look forward to Mr. Hefner and other key members of management being an integral part of the combined companies.”

The letter to Playboy’s Board of Directors proposes a meeting for July 21, 2010 to discuss the opportunity.
The text of that letter is set forth below.

Gentlemen:

We understand that you have received a proposal from Hugh Hefner to acquire all of the outstanding shares of Class A and Class B common stock of Playboy for $5.50 per share in cash, implying an equity value for Playboy Enterprises of approximately $185 million. 

We believe that we can structure an offer to acquire Playboy Enterprises, Inc.  in a transaction worth over $210 million of equity value (which could increase based on our receipt and review of certain due diligence information including updated financial data), and would propose a meeting with your board to discuss this opportunity on Wednesday, July 21, 2010.  This would represent at least a 10% premium over the proposal made to you by Mr. Hefner and Rizvi Traverse.

We would propose an arrangement where we would partner with Mr. Hefner in our efforts to drive shareholder value.  We envision that following the completion of the proposed transaction, Mr. Hefner would retain editorial control of Playboy Magazine and would be entitled to reside in the Playboy Mansion. 

We believe our proposal is in the best interests of Playboy Enterprises and its minority stockholders.  Our proposal provides an excellent opportunity for the minority stockholders of Playboy Enterprises to realize liquidity for their shares at a significant premium to market values, provides a basis for future growth, and would reinvigorate the company and enhance the legacy of the Playboy brand. 

We would expect continuity of senior management through completion of the transactions contemplated by this proposal, and we are open to participation by continuing members of senior management on a going forward basis. 

We have spoken with our financial advisors and have contacted major lenders regarding potential financing for this transaction.  We are very confident that ample financial resources will be available to complete this transaction.  We contemplate that the definitive agreements will not contain a financing contingency.

This indication of interest is non-binding and no agreement, arrangement or understanding between FriendFinder Networks and Playboy Enterprises, Inc. has been or will be created until such time as definitive documentation has been executed and delivered by all appropriate parties, any requisite consents are obtained and any proposed agreement, arrangement or understanding has been approved by any special committees and the Boards of Directors, as appropriate.

We believe that together we can create a 21st century media powerhouse and generate tremendous synergies through the combination of Playboy’s iconic brands and licensing engine with the Penthouse brands and the demonstrated technological innovations of FriendFinder Networks. 

Sincerely,

FRIENDFINDER NETWORKS INC.

Marc H. Bell

President and Chief Executive Officer

Ref: F231109-495

Related articles

• Who is buying Playboy? Posted on July 13, 2010
• Is Playboy about to start making acquisitions? Posted on May 4, 2010

Hugh Hefner has put in a bid to the board of directors of Playboy Enterprises to buy all of the outstanding shares of Class A and Class B common stock of PEI not currently owned by Hefner for $5.50 per share in cash.  Hefner owns 69.5% of PEI’s Class A common stock and 27.7% of PEI’s Class B common stock. 

According to the proposal letter, Hefner has had discussions with Rizvi Traverse Management, with whom Hefner expresses an intention to partner in connection with the transaction.  The bid values Playboy at $185 million.

Update

Friend Finder Network, owner of Penthouse, said it was preparing to make a counteroffer. Friend Finder Chief Executive Marc Bell said Hefner’s offer “dramatically” undervalues Playboy.

Location: USA, Chicago, IL

Ref: F231109-493

Related article – Is Playboy about to start making acquisitions? Posted on May 4, 2010