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Penthouse parent beefs up online biz ahead of IPO
NEW YORK (Reuters) - FriendFinder Networks Inc, the parent of iconic men's magazine Penthouse, plans to move toward a bigger focus on its social networking sites, even as it keeps the raunchy magazine rolling off the presses, Chief Executive Officer Marc Bell said on Tuesday.
The company filed for a $460 million initial public offering in December, despite a slow market for new issues, wanting to be ready when public markets reopen.
Bell told Reuters in an interview he hopes by the time the company clears all the regulatory hurdles, possibly as soon as early spring, investors may be more receptive to IPOs.
FriendFinder may not be shutting the pages on Penthouse, but Bell says the brand has little to do with where the broader company is headed.
"The magazine is irrelevant -- it is a good brand, but we're an Internet company," Bell told Reuters in an interview, referring to how little the publication contributes to revenue. He declined to say what its contribution is.
Still, although he soft-pedals the importance of Penthouse, sex is a common theme in the company's offerings, allowing the magazine and the FriendFinder sites to promote one another.
According to a regulatory filing, FriendFinder's revenue was $262.4 million for the nine months ended September 30, 2008.
He hopes to whet the appetite of investors with FriendFinder's recent quarterly results, which showed growth from cash operations. But it might be a hard sell since the company has posted losses in the last three years.
FriendFinder runs a number of social networking sites, most of which are designed to help adults connect for romantic and sexual relations.
Its largest site, AdultFriendFinder.com, had signed up 131 million members since its inception on September 30, 2008, according to a regulatory filing.
It also offers nonsexual sites such as AsiaFriendFinder.com and Amigos.com, which caters to Spanish speakers, although they make up a small share of revenues.
FriendFinder plans to use the IPO proceeds to pay down debt, helping it make future possible acquisitions.
Bell has been CEO since 2004 and is also managing director of Marc Bell Capital Partners, a Boca Raton, Fla. private equity firm he founded in 2003.
Penthouse Media Group paid $500 million in December 2007 to buy Various Inc, the owner of FriendFinder Networks Inc whose name it took in July 2008.
Bell estimates one-quarter of Americans over 18 are a member of any one of the company's sites, giving it the opportunity to sell more on-line advertising, which now makes up about 1 percent of revenue.
"We are as mainstream as Wal-Mart," Bell said.
Paying down debt with IPO proceeds could give FriendFinder the financial flexibility to pursue acquisitions.
"This would free up cash flow from lower debt service," said Bell, and "give us a public currency."
He declined to say what companies FriendFinder may be eyeing.
So far, FriendFinder's IPO is being solely underwritten by Russian firm Renaissance Capital, although Bell expects others to take part in the IPO when it is launched.
"Sixty-five percent of our member base is outside of the U.S., so we wanted a global bank. I anticipate we will be adding more people to the cover," he said of the potential to add bookrunners.
(Editing by Andre Grenon)
