Despite its $17.6 million deal to acquire Club Jenna Inc. and other deals, financial analysts say Playboy is a prime target for a leveraged buyout.
After announcing a $3.3 million loss during the second quarter and its ongoing efforts to cut costs this week, financial analysts say Hugh Hefner’s Playboy Enterprises is an attractive buy for those willing to shell out for a still valuable brand.
“We would not rule Playboy out as (leveraged buyout) or (management buyout) candidate,” said Michael Savner, a financial analyst with Bank of America Securities.
The fact the company shelled out big big bucks for porn star Jenna Jameson’s hardcore Club Jenna business, means Playboy is reconsidering its strategy, Savner said.
No longer are pretty pictures of statuesque models enough for Hefner & Co., who now see Jenna’s combination of sexy women having hardcore sex as a new direction for the company.
Having laid out $7.7 million as an initial payment, Playboy’s deal calls for subsequent payments over the next four years totaling $9.9 million, making it one of the biggest acquisitions in years for the company.
Mark Boyar, head of investment house Mark Boyar & Co., said Playboy’s struggles’ aside, the company is still a valuable global brand that remains undervalued.
With an equity-market value of about $310 million and net debt of just $65 million, Boyar says the company should be at more than $20 a share than its current $9.26 price reported this morning.
But with Hef’s daughter, Christy Hefner, running the business and helping push for the Jenna acquisition, Boyar’s optimism about its outlook is well founded, he says.
The company, he says, stands alone as a fixture in both, adult and mainstream entertainment.
Playboy’s offerings include “The Girls Next Door,” on the E! network, featuring Hugh Hefner and four of his girlfriends, along with the soft-core Playboy TV channel and the hardcore Spice and Hot Zone TV networks, which feature videos showing explicit sex.
Analysts also credit Christie Hefner’s push into online content which has helped turn the company around by offering the company’s latest titles and other content on a pay-per-minute basis. That makes it more lucrative than its satellite or video-on-demand services since Playboy would have to split its revenue with cable and satellite providers.
Even though DirecTV recently dropped its exclusive arrangement with Playboy, the company remains a big player in that market and on cable where its Playboy TV brand remains popular.
But even so, some critics blast the company’s slow response to the market, in particular to its publishing empire. Hugh Hefner, who is still editor-in-chief at Playboy Magazine, is still said to okay much of its content and still has an influence on his daughter’s business decisions, making some wonder whether an eventual buyout is a possibility.
Christie Hefner herself could not be reached for comment. But she has said the company is not for sale.
