Memo Pad: Playboy's Stock Hop... Free Falling... PR Changes...

Playboy Enterprises’ stock surged 42 percent to $4.07 on Thursday on reports that Iconix Brand Group is in talks to buy the company. Just a few weeks ago, Iconix acquired a 51 percent stake in Ecko Enterprises and, earlier this year, the company added Ed Hardy to its portfolio. But while Playboy gained on the reports, Iconix, home to brands such as London Fog, Rocawear, Candie’s and Badgley Mischka, saw its shares fall 3.2 percent to $11.76. An Iconix spokeswoman had no comment on whether the company is interested in Playboy, which was first reported by Bloomberg, and no comment on whether Iconix could partner with Playboy or enter into a licensing deal.

Sources familiar with the operations of Playboy told WWD they could easily see Iconix taking on Playboy and handling its licensing and intellectual property work, while licensing out the publishing rights. Investment banker Richard Kestenbaum of Triangle Capital also believes the deal makes sense for Iconix. “Outside the United States, Playboy is a valid lifestyle brand, and Iconix understands how to capitalize on the lifestyle nature of the product,” said Kestenbaum. “Within the United States and elsewhere in the world, the Playboy media properties are a great way for Iconix to expand into other classifications and lay to rest the claim that Iconix is not capable of developing other products besides home and apparel. The company would enhance its position in the equity markets if investors understood that Iconix has the capability to go beyond the soft goods it is in.”

Bankers also said that whether a deal can get done will depend on the existing licensing income and whether Iconix can get the minimums it needs to justify the purchase price, either through existing ones or through new licensees.

Last year, only two segments of Playboy’s business were profitable — entertainment and licensing. Entertainment had an operating profit of $12.3 million on revenues of $167.2 million, while licensing generated almost twice as much operating profit — $23.7 million — on $40.4 million in revenues. Licensing has lower overhead and would understandably throw off better margins, but was enormously important to Playboy, as of course it would be to Iconix. A spokesman for Playboy declined to comment on the reports.

— Amy Wicks and Arnold J. Karr