A private equity firm headed by former cannabis entrepreneur Chuck Rifici is in talks to acquire significant assets of the controversial tech company MindGeek, which owns Pornhub, one of the world’s largest pornography sites, according to two sources familiar with the discussions.
The talks are continuing and a deal is not guaranteed, according to the sources, whom The Globe and Mail is not identifying because they are not authorized to discuss the negotiations publicly.
Mr. Rifici founded Bruinen Investments Inc. in April with the goal of acquiring MindGeek and its prime asset, Pornhub, according to one of the sources. It is unclear how much the company or its assets are worth.
One source said the discussions have been going on for months, adding that Bruinen has secured lenders to fund the transaction.
The negotiations come amid a new civil suit filed against MindGeek Thursday morning on behalf of 34 women in a California court, alleging the company engaged in “financial crimes and human trafficking” by allowing the monetization of child pornography, rape videos and trafficked content on its two largest adult sites, Pornhub and RedTube.
In a statement to The Globe, Mr. Rifici said his private equity firm is “exploring a number of opportunities” but he could not comment specifically on whether he was in talks with MindGeek.
MindGeek said it had no comment on the reports of continuing discussions.
MindGeek is registered in Luxembourg, but its main office is in Montreal. It employs more than 1,000 people in Canada and is largely run by long-time employees and minority shareholders Feras Antoon and David Tassillo. It operates some of the most popular paid and free pornography websites in the world.
In October, 2013, the company – then called Manwin Holding S.A.R.L. and headquartered in Luxembourg – was bought for US$300-million by Bernd Bergmair, Mr. Antoon and Mr. Tassillo, according to data from the financial intelligence company S&P Capital IQ.
Mr. Bergmair, an Austrian businessman who lives in London, is the majority shareholder and previously owned another pornography website before buying MindGeek. He did not reply to a request for comment.
Financial records show MindGeek earned US$460-million in 2018 and turned in a profit of US$22.2-million. But the company is heavily indebted, carrying a US$370-million term loan with an 11.9-per-cent interest rate, and profit margins have significantly narrowed in the past few years.
Pornhub, which alone receives an average of 130 million visits a day, regularly ranks among the most visited websites in the world. But MindGeek’s operations are not confined to pornographic content: It owns the ad network TrafficJunky, which claims to serve as many as 4.6 billion ad impressions every day on porn sites it owns.
Mr. Rifici, an Ottawa-based entrepreneur, was the treasurer of the Liberal Party of Canada from 2011 to 2016. In the midst of his tenure with the Liberals, he co-founded the medical cannabis behemoth Canopy Growth Corp. in 2013 but left the company shortly thereafter, a departure that spawned a wrongful dismissal suit. He went on to head Auxly Cannabis Group during the early days of cannabis legalization through his holding company Nesta Holding Co. Ltd.
Bruinen Investments is his latest venture. Its website states it is a “different kind of” private equity firm, putting “ethics first to deliver safe, legal and positive online experiences for adults.”
Other Bruinen executives include Fady Mansour, an Ottawa-based criminal lawyer, and Malcolm Katz-Larson, a former venture capitalist with Inovia Capital. British entertainment executive Sophie Watts, the chief executive of Eros International, is a special adviser to Bruinen. Former RCMP drug czar Derek Ogden sits on the company’s board.
MindGeek has been mired in class-action litigation in Canada and the United States ever since The New York Times published an article in December stating the company profits from hosting revenge porn and child sexual-abuse material. Mastercard and Visa subsequently suspended the use of their cards on Pornhub.
In December, 40 women sued MindGeek in a U.S. court alleging the company knew or should have known that one of its content partners regularly used fraud or coerced women into appearing in videos.
That same month, an Ontario woman filed a lawsuit in Quebec’s Superior Court alleging Pornhub hosted a video depicting her sexual abuse at the age of 12. Two women filed another lawsuit in Alabama in February against MindGeek, alleging images and videos of their sexual abuse were posted to the company’s websites.
The House of Commons ethics committee held hearings into Pornhub earlier this year, and Mr. Antoon and Mr. Tassillo defended MindGeek’s security measures and content moderation policies. In April, RCMP Commissioner Brenda Lucki told the committee the RCMP were reviewing a request to investigate MindGeek.
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