Playboy (NASDAQ:PLBY) saw its stock spike by 26% on Monday after the company announced a significant agreement with United Trademark Group (UTG) to sell half of its China business for a total of $122 million in cash payments. This strategic move marks a pivotal step in Playboy's efforts to expand its global footprint while optimizing its financial position.

Under the terms of the deal, Playboy will receive $45 million over the next two years as part of UTG's acquisition of a 50% interest in its China operations. Additionally, the agreement includes $67 million in guaranteed minimum distribution payments over eight years, along with $10 million in brand support payments spread across the next three years. As part of the partnership, UTG will take over all operational responsibilities for Playboy's business activities in China, Hong Kong, and Macau.

Importantly, Playboy plans to allocate at least $50 million of the proceeds to reduce its debt, a move the company anticipates will make the transaction immediately accretive to earnings. The initial closing of the deal is expected by March 31, 2026, with UTG already having paid a $9 million deposit to secure the agreement.

Ben Kohn, Chief Executive Officer of Playboy, expressed enthusiasm about the partnership, stating, “We are partnering with UTG, a globally respected operator with a strong track record stewarding leading international brands in China. Partnering with UTG allows them to make a meaningful investment in the future of the brand in China, positioning Playboy for sustained, long-term growth in one of the world's most important consumer markets.”

This deal not only strengthens Playboy's presence in China but also aligns with the company's asset-light strategy. By retaining a 50% ownership stake, Playboy maintains the potential for additional upside as UTG grows the business. Beyond the guaranteed payments, the company expects to receive further annual distributions as the partnership flourishes.

In summary, this agreement represents a major milestone for Playboy, enabling the company to reduce debt, enhance earnings, and position itself for long-term growth in one of the world's largest consumer markets. Investors responded positively to the news, driving Playboy's stock to impressive gains.