With a market capitalization of $82 million, a $300 million buyout price would be a lot to pay for Playboy Enterprises (NYSE: PLA). But The New York Post reports that's the price the company is looking for as it quietly shops for a private equity firm interested in the flailing icon.
Keith J. Kelly reports that "Sources said the sellers are looking for far more than the company's market capitalization because that would ensure Hef has enough on hand to maintain his lavish lifestyle."
Apollo Management and Providence Equity Partners have been approached, but neither has demonstrated a desire to make a deal. Hugh Hefner owns a controlling stake in the company, and the anti-shareholder dual-class voting structure means that any deal would need his blessing.
Here's a tip for Playboy and its investment bankers: You have to sell a business based on what it's worth, not based on how much money you need to support a gluttonous lifestyle.
A Playboy spokesperson told the New York Post that "We have not received a proposal for purchase, nor has Mr. Hefner indicated that he will listen to proposals regarding a sale. However, as a public company, we will listen to proposals that could create value for all of our shareholders."
As much goodwill as the Playboy brand has, the stock has been pounded into the ground for a reason. The company is burning through cash and, with $115 million in debt against a negative book value once you back out goodwill, it won't be long before buyers can have the company on their own terms, especially if the economy stays weak and the company can't execute a quick turnaround.
If Hef isn't willing to make a deal at less than $300 million, Playboy shareholders will have to live or die based on the company's prospects as a stand-alone public company.
