ILLINOIS, United States — Hugh Hefner wants to buy out the portion of the Playboy empire he doesn’t already own in a bet that the iconic brand can still bring in profits even if the ink-on-paper magazine is past its prime.

Hefner, who founded Playboy magazine more than a half-century ago, is apparently not alone in thinking Playboy can keep swinging into the digital age. A few hours after Playboy Enterprises Inc announced Hefner’s offer Monday, the corporate parent of rival Penthouse magazine said it will also make a bid.

But it does not appear that the silk pajama-clad 84-year-old — who owns about 70 per cent of the company’s voting shares and 28 per cent of the nonvoting stock — will budge.

Playboy said Hefner made it clear in his buyout proposal that he is not interested in a sale or merger. The company said Hefner expressed concern that selling Playboy could threaten the brand and its legacy. Hefner has instead proposed joining up with a little-known private equity firm, Rizvi Traverse Management LLC, to take Playboy private.

The offer comes as print advertising is in a tailspin and the company has stretched its brand thin trying to wring profits through leasing its famous bunny ears for everything from cigars to slot machines.

Hefner is offering US$5.50 per share in cash, a nearly 40 per cent premium above Friday’s closing stock price of US$3.94. Shares of the company gained 41 per cent Monday. Based on the number of shares outstanding on April 30, Hefner’s proposal is worth US$122.5 million and values the company at about US$185 million.

Playboy, which is headquartered in Chicago, described Hefner’s offer letter as a proposal and said there was no guarantee it would get any formal bid from Hefner. But Playboy said Hefner indicated that Rizvi Traverse has been in touch with “major lenders regarding potential financing” and is “highly confident ample financial resources will be available to complete the transaction.”

The firm declined further comment, and Hefner did not respond to requests for an interview.

If the deal goes through, Hefner will have a major turnaround effort on his hands.

The racy magazine that Hefner launched in 1953 had its most popular years back in the 1970s. It has struggled to lure readers and advertisers as the Internet supplants print as the top purveyor of adult content. Falling revenue has forced several rounds of layoffs at the company since 2008.

Playboy magazine, which along with its websites generated 44 per cent of the company’s US$240 million in revenue last year, sold 311 ad pages for its US editions last year, down from 765 in 2000, according to the Publishers Information Bureau. Its average circulation has fallen by about a million copies over the same period to 2.02 million. That’s down from more than 5.6 million in 1975.

These days, most of the company’s income is drawn from licensing the Playboy brand for consumer products such as men’s underwear, women’s lingerie, watches and energy drinks.

Its licensing unit reported income of US$21 million last year, followed by US$9.9 million from the company’s television properties and just US$1.6 million from the magazine and its Web site. Factoring in corporate overhead, costs related to layoffs and write-downs on the value of its assets, Playboy reported a net loss of US$51.3 million in 2009.

The company’s stock price has tumbled since hitting a peak in 1999 of more than US$32. It traded between US$2.30 and US$5.22 over the past year before jumping US$1.61 to close at US$5.55 on the potential buyout Monday.

Looking ahead, Playboy’s strategy of relying on licensing for profits is a risky one, warned Laura Ries, president of the marketing strategy firm Ries & Ries in Atlanta. She said Playboy has lent its brand too freely.

“It’s like pouring water into beer,” she said. “It really dilutes what it is to be a playboy.”

But Ries said going private could be a good move, allowing the company to work on building the brand without the pressure to hit quarterly earnings targets.

Not surprisingly, Marc Bell, the CEO of Penthouse owner FriendFinder, said he is interested in Playboy more for the brand’s potential on the Web and mobile gadgets than the iconic printed magazine.

“The real focus is on the digital side,” Bell said. Though he said shutting down the print magazine would be a bad idea, he added, “It needs to be run like a 21st century company.”

It is not clear what resources privately held FriendFinder has to put behind its bid. FriendFinder, which also runs other adult and dating websites, produces adult videos and licenses adult content, shelved its plans to go public earlier this year, blaming the poor market conditions. Executives had hoped to raise at least US$200 million in the transaction.

Bell had acquired Penthouse as part of a 2003 bankruptcy reorganisation that also saw the resignation of founder Robert Guccione as the company’s CEO. Bell declined to give any specifics on his offer, which he said would come soon.

Bob Guccione Jr, who founded Spin magazine and whose father started Penthouse to compete with Playboy in 1965, said whoever leads the magazine is going to have to update its sensibility.

“It has to be modernised,” Guccione said. “It should acknowledge the modern woman, who is more equal, more independent and not just interested in getting married — and by the way far more sexy and interesting.”