Playboy Selling Itself Too Cheaply With Hefner Bid, Suit Says

CHICAGO — A class-action suit alleges that Hugh Hefner and investment banker Rizvi Traverse Management's bid for Playboy at $5.50 a share is too low and that the company would be breaching its shareholder fiduciary duties if the adult giant is sold for an equivalent $185 million.

The suit, one of perhaps additional shareholder suits, was filed at Cook County Chancery Court and names Playboy Enterprises Inc. and Rizvi Traverse as well as Playboy board members. It seeks an order to rescind the proposed acquisition.

The suit coincided Thursday with the announcement that FriendFinder Networks Inc. offered to buy Playboy for $210 million, representing a $25 million premium over Hefner's offer.

FriendFinder — which owns Penthouse, AdultFriendFinder and dozens of other social-networking and cam sites — said with its bid that Hefner would be able to carry on with Playboy Magazine as its editor. Hefner also could continue residing at the Playboy Mansion.

The suit said that the company has admitted that it has been "truly an empire ruled by one man" and that "until recently, [Playboy] had fallen upon hard times, positioned as a magazine-driven company in an Internet age."

But the suit also said that Playboy had "embarked on a plan to restructure Playboy by transitioning it to a brand management company."

"Thus far, the transition plan has been working," the suit said, citing the company rebounding in its first quarter, seeing a net loss of $1 million, far shy of the $13.7 million net loss it saw in the first quarter of the previous year.

"Time is of the essence," the suit said," as Hefner and the [Playboy] board work towards consummating the proposed acquisition at a fire-sale price while blocking all other competing non-Hefner driven bids."