Nov. 12 (Bloomberg) -- Playboy Enterprises Inc., the men’s magazine publisher, is in talks to sell itself to Iconix Brand Group Inc., according to two people close to the situation. Playboy’s stock jumped 42 percent.

Iconix, the owner of the Candie’s and London Fog clothing brands, has looked at Chicago-based Playboy’s finances, said one of the people, who declined to be identified because the talks aren’t public. The discussions may not lead to a transaction, the person said.

Playboy’s market value had dropped to about $100 million before today as circulation plunged at the namesake magazine Hugh Hefner started in December 1953 with photos of Marilyn Monroe. Iconix Chairman and Chief Executive Officer Neil Cole is looking for acquisitions to add more brands that the New York- based company can license to retailers and manufacturers.

“Neil Cole has done a phenomenal job of taking some of these lost brands and developing them into something,” said Gilbert Harrison, chairman and CEO of Financo Inc., a New York- based adviser and investment bank specializing in retail. “Certainly Playboy would fit that mold.”

Playboy’s management has been looking for a buyer since Scott Flanders was appointed as CEO in June, one person close to the situation said. Flanders, the former CEO of Freedom Communications Inc., replaced Christie Hefner, who had run Playboy since 1988 and is the daughter of Hugh Hefner.

Stock Jump

Playboy rose $1.21 to $4.07 at 4:15 p.m. in New York Stock Exchange composite trading. Iconix declined 39 cents, or 3.2 percent, to $11.76 on the Nasdaq Stock Market, giving the company a market value of about $840 million.

A spokesperson for Iconix declined to comment. Playboy said in a statement today that it wouldn’t comment, in keeping with its policy on such matters.

Hugh Hefner, 83, has a controlling stake in Playboy, with about 70 percent of Class A voting shares and 28 percent of the Class B shares. The company had $103 million in long-term financing obligations at the end of September.

Iconix’s Cole said in October that the company has $200 million to $300 million available for acquisitions. Iconix, which also owns Danskin and Mossimo, bought a controlling stake in Ecko brands this month and made an unsuccessful bid for outdoor-clothing chain Eddie Bauer Holdings Inc. this year.

Cole founded Iconix in 1992. Revenue has more than doubled in the past two years, from $80.7 million in 2006 to $216.8 million last year.

In addition to its magazine, Playboy licenses products bearing its bunny logo, and creates videos for its Web site and cable-television networks. Licensing revenue in the first nine months of the year declined 14 percent to $28.1 million.

Playboy Readers

Playboy magazine garnered a following for its fiction, including selections by Margaret Atwood and Vladimir Nabokov, and American football coverage, as well as its photos of nude women. The company ran a chain of branded clubs, staffed by women dressed in bunny outfits, as well as a premium cable channel and branded videos and DVDs.

The magazine’s circulation dropped 9.2 percent to 2.45 million in the six months through June, compared with a year earlier, according to the Audit Bureau of Circulations. Industrywide, consumer magazine circulation fell 1.2 percent in the period.

Advertising revenue at Playboy magazine fell 33 percent to $34 million during the first nine months of the year, Publishers Information Bureau data show. That outpaced a 20 percent drop in industry ad revenue.

The unprofitable publisher said in May that it was considering raising the price of the magazine, reducing the frequency of publication or cutting circulation.

In the third quarter, Playboy’s net loss narrowed to $1.1 million, or 3 cents a share, from $6.2 million, or 19 cents, a year earlier, according to a Nov. 5 statement. Revenue fell 20 percent to $56 million.

To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Lauren Coleman-Lochner in New York at llochner@bloomberg.net

Last Updated: November 12, 2009 16:25 EST