Professor Elam

Thursday July 15, 2010

Yesterday in cost class I suggested that there are four levels of probablility.

Certainly true

Probable

Plausible

Not true

The difficulty of course is that gray line between probable and plausible, what is going to happen. This article about Henry Kravis and Hugh Hefner puts that in perspective. Kravis is famous for the tobacco takeover of RJR made famous in the movie Barbarians at the Gates. Now 66, he is moving his public firm from an Amsterdam listing to the NYSE. Clearly he hopes the shares will go higher. Hefner, 84, owns 70%, the majority of the shares in PLA. Yet oddly he has offered $123 M to buy the whole thing. The entire company was recently worth less than $200M. Not long ago it was estimated the CA mansion was worth near $100M, suggesting the break up value of the firm was higher than it was trading. While the author refers to his daughter Christie as brilliant, the facts hardly back that up. The shares fell in value over her tenure, the company took on debt that never paid off, and well, here we are today. Someone bought the PUMA brand not long ago for I think $15 M and is bringing it back. 

 So, having done little or nothing with PLA for the last ten years (okay there was that wonderful reality show with Hef and the three gals) is it probable or plausible that at 84 Hef is going to be able to do something with a private firm that he could not do with a public firm?

Career advice, when someone tells you that they are thinking of retiring and want to bring someone like yourself in to run the firm, remember Henry and Hef, they never retire….kinda' like Supreme Court Justices and Popes……