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More good news for Playboy

Today's Financial News - Posted November 24, 2009

More good news for PlayboyWith a potential suitor in sight, Playboy (NYSE:PLA) is shoring up its books. It is more good news for shareholders.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): Good news for the bunny bulls. There is more in the way of confirmation today that Playboy Enterprises (NYSE:PLA) is ready for new ownership.

Word that the company is outsourcing its magazine operations is strong evidence the company is focusing on shoring up the value of its iconic brand.

According to reports this morning, Playboy is sending its publishing work to American Media Inc, the nation’s fourth-largest magazine publisher. With titles like Men’s Fitness, Flex, Shape and, suitable-enough, FitPregnancy, Playboy’s content offering will fall right in line with current offerings.

There are two reasons this is good news for Playboy shareholders.

First, consider it the equivalent of installing new carpet and a coat of paint before selling a house. Playboy’s magazine operations (the equivalent of 70’s style shag carpet) have been lackluster at best thanks to the Internet’s “freebies.”

Prepare for spinoff

By sending the daily workings to American Media, Playboy hopes to have its magazine back in the black within two years, after losing a forecasted $8 million in 2009. For many potential buyers, especially those that simply want that black-and-white bunny logo, getting the magazine to at least sustain itself is a strong selling point.

The decision to outsource publishing also means the potential buyer does not have to worry about taking over an unfamiliar business, especially one in the terribly shaky publishing industry.

Potential suitors, like Iconix Brands (NASDAQ:ICON), which currently owns a portfolio of consumer brands, will not have to worry about the expense and strategic distraction of suddenly owning a major publication. They will only have to deal with brand management, a current core value.

This move proves Playboy is ramping up its determination to be bought. If Iconix is not the buyer, another player will emerge shortly.

While many investors see this as a potential $300 million deal (almost twice today’s value), there’s a possibility it could go even higher, especially if rumors that Hugh Heffner wants ten bucks a share are true.

Today’s headlines are good news for current Playboy shareholders, yet share price does not reflect it. That is even better news for investors looking to get in on the action.


Next Article: Today’s winners point the way forward

Posted by Andrew Snyder · Filed Under Featuring..., US Stocks and Markets 

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