Playboy: Is the bunny for sale?
Today's Financial News - Posted November 12, 2009
Investors are clamoring like anxious teenage boys over news that Playboy Enterprises (NYSE:PLA) has a new suitor. It raises the question is Playboy worth more in pieces than as a whole?
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Hugh Heffner has got to be smiling today. Not because of his “little blue pill” or his harem of voluptuous blondes, but because his beloved brand and his nearly eight million shares of Playboy Enterprises (NYSE:PLA) may have a new suitor.
According to rumors that broke just after noon here on the East Coast, Iconix Brands (NASDAQ:ICON) has taken a long, hard look at what lies under Playboy’s blouse.
The news that Iconix is doing its due diligence sent shares of Playboy up by over 25% almost instantly.
This is an interesting chunk of information not because Heffner’s enterprise could fall into the hands of new ownership, but because a small sliver of his company could be sliced away from the pie.
Let’s face it. Playboy is not what it used to be.
If you subscribe to the magazine, chances are you really are reading the articles, because you can get the rest for free. The online word has drastically changed the company’s business strategy.
No hiding under the mattress
Fortunately, Heffner and his team have created an iconic brand over the years. The bunny logo and what it represents is instantly recognizable almost anywhere in the world.
That’s something any company would be willing to pay big bucks for.
Playboy investors have been saying for years the parts of their company are worth more than the sum, at least the current sum.
Chances are that is exactly what Iconix is thinking. As the owner of a portfolio of well-known apparel brands like Rocawear, Candies, Mossimo and Starter, the company could do good things with the bunny on its sides.
In other words, Iconix doesn’t want a bunch of naked women and a failing magazine. It wants the powerful marketing forces of Playboy’s timeless brand.
Here’s the good news for investors.
If Iconix wants its shot at the brand, it will likely have to pay a hefty premium for it. In all likelihood, whatever pieces can successfully be broken off from Heffner’s empire will cost more than today’s market value of $119 million.
That means even after today’s surge, shares of Playboy are undervalued. Look for a price of $4.00 by the time any concrete information about a deal hits the Street.
As with most things that Playboy represents, a monogamous courtship will not be enough. Look for other players to move in on Iconix territory. If it happens, get ready for big moves.
Playboy may be getting older and has some younger, sleeker competition, but to investors, the profit potential is as sexy as ever.
Next Article: TFN eNews 11/12/2009: Markets thrive on denial! But so do we!
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