March 5 (Bloomberg) -- Penthouse Media Group Inc., owner of the namesake men's magazine, plans to sell about $250 million in stock in an initial public offering as it seeks to compete with Playboy Enterprises Inc.

The Boca Raton, Florida-based company plans to file a registration statement with the U.S. Securities and Exchange Commission in the second quarter, according to a statement today.

Penthouse has been acquiring adult Web sites and video producers in the past two years to expand beyond the magazine, where circulation has been declining. Led by Chief Executive Officer Marc Bell, the company in December agreed to buy Various Inc., the owner of more than 25 Web sites including adultfriendfinder.com, for $500 million in cash and stock.

Circulation at the magazine dropped 3 percent in the six months ended Dec. 31, to 350,583, according to the Audit Bureau of Circulations in Schaumburg, Illinois. Circulation at rival Playboy also fell in the fourth quarter, contributing to a 2 percent drop in publishing revenue, the company said last month.

Penthouse projected in December that the Various acquisition would boost annual sales more than 11-fold to $340 million, putting it on par with Playboy, which posted 2007 revenue of $339.8 million on Feb. 13.

Penthouse is looking to acquire Web sites outside the adult-entertainment industry, Bell said in a Feb. 27 telephone interview.

Acquisition Program

``We are very busy with our acquisition program,'' Bell said. ``We're now looking at what kind of mainstream Web sites we can acquire.'' He didn't immediately return a call seeking comment today on the initial public offering.

The company teamed in September with New Frontier Media Inc. to start Penthouse TV. It also plans to start new sites to complement those already run by Various, Bell said.

``We realize it's a digital world, and we're focusing very much on digital content,'' he said in a telephone interview in December.

Penthouse said it would use the proceeds from the offering primarily to pay down debt.

Playboy, based in Chicago, declined 4 cents to $7.92 as of 4:30 p.m. in New York Stock Exchange composite trading. The shares have fallen 13 percent this year.

Bell is part of a group that bought Penthouse from General Media Inc. in 2005. Former General Media CEO Bob Guccione first published Penthouse magazine in London in 1965 and in the U.S. in 1969.

Guccione's mansion on Manhattan's Upper East Side was recently sold for $49 million to Philip Falcone of Harbinger Capital Partners.

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net.

Last Updated: March 5, 2008 19:01 EST