After Hugh Hefner’s passing and recent interment next to the crypt of Marilyn Monroe, eyes now fall on his estate where questions remain on what will happen to Hefner’s remaining 35 percent stake in Playboy Enterprises.
For much of Playboy’s history, Hefner remained the sole owner of the company, however, he took Playboy public in the 1980s just as its readership began to fall. In 2009, Hefner bought back all the shares for Playboy and again made the company privately owned, but sold a controlling stake of 65 percent in 2011 to keep the company afloat.
The sale was made to Rizvi Traverse, a management and investment company with strong ties to Hollywood. The sale included a number of clauses, one of which was that despite the print magazine consistently losing money, it would continue to operate with Hefner as editor until his death. Sources close to the deal say that had the rest of Playboy not started turning a profit shortly before the sale, Rizvi Traverse would never have agreed to it in the first place.
There was another clause involving Hefner’s death, one that required Rizvi Traverse to buy Hefner’s 35 percent stake in the company after his passing. If Rizvi Traverse is unable or simply refuses to do so then the shares are sold to the highest bidder.
Insiders close to the company say it seems likely that Rizvi Traverse will purchase the shares, which have been valued at around $45 million, with the proceeds of the shares going to Hefner’s estate.Rizvi Traverse hired investment banker Moelis & Co. to finance the purchase a few months ago, however, nothing is set in stone as the contract also gave a deadline of one year since Hefner’s death.
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However, that same source also put into doubt the future of Playboy magazine. “Hef’s contract with Rizvi stated that they were required to publish the magazine, and he got to be editor as long as he lived,” the source began. “So while he might not have been highly involved in the day-to-day, just him being alive served as a shield, and those of us working there always assumed that they would shut the magazine down the second he passed away.”
Experts estimate that Playboy magazine may be costing Playboy Enterprises as much as $5 million a year—a loss only offset by the profits being made by Playboy’s media and licensing groups.