Playboy Shells Out $5.25 Million to Settle Lawsuit
LOS ANGELES — Playboy Enterprises Inc. is shelling out $5.25 million to settle a lawsuit over claims its founder, Hugh Hefner, shortchanged investors in a buyout last March.
The battle began after Hefner took the company private through a partnership with Rizvi Traverse Management LLC in the 2011 $207 million deal.
Rizvi Traverse will reportedly also contribute to the settlement.
Hefner pushed the buyout after he faced a challenge for control of the company in 2010 when FriendFinder Networks Inc., owner of Penthouse magazine, offered $210 million for Playboy.
Stockholders complained that they got the shaft over the offer that started at $5.50 a share and increased to $6.15 a share the following year.
Some investors said the offer was “an inadequate price” despite the fact that, according to court papers, the deal was backed by more than 84 percent of the company’s minority stockholders.
Company officials said the acquisition provided a 50 percent premium to investors.
The agreement resolves four suits over the deal, according to Delaware Chancery Court filings made public in Wilmington. Hefner and company executives denied they harmed investors as part of the transaction.
“The defendants are entering into the stipulation solely because the settlement would eliminate the burden, expense and uncertainties inherent in further litigation,” company officials said in the filing.
“Plaintiffs’ counsel have concluded that the settlement is fair and adequate and that it is reasonable,” the parties wrote in their memorandum.
The settlement is still contingent upon approval from Delaware Chancery Court Judge John Noble.
Playboy was contacted by XBIZ but declined to comment on the settlement.