Mr Men and Noddy owner Chorion is considering a bid for Hit Entertainment, home to Thomas the Tank Engine and Bob the Builder, with three private equity firms understood to be lined up to back the move.
In October it emerged that Apax Partners, the private equity owner of Hit Entertainment, had started making tentative approaches to potential buyers including Chorion to look to offload the Thomas the Tank Engine franchise of the indebted business.
The Chorion chairman, Lord Waheed Alli, has in the past made it clear that he is keen on a full merger of the two businesses several years after taking the company private to focus on growing brands including Mr Men, Beatrix Potter and Olivia the Pig.
Alli has been considering a number of strategic routes for the business including a public listing in the next 24 months, or a tie-up with Hit. However, 3i, which owns Chorion, is not supportive of Alli's expansion plans.
Chorion has appointed investment bank Jefferies to help with the appointment of one of the three potential investors.
Subsequently, a bid for Hit will potentially be made in the first quarter next year with 3i maintaining a minority stake if a deal can be successfully struck. However, Chorion is likely to face competition from US media firms such as Mattel, Hasbro, Disney and Viacom.
Apax is auctioning the business with a pricetag of up to £1bn but City sources believe this is an overly optimistic target. Apax was forced to write down Hit's value by £325m earlier this year in order to secure a new debt deal but managed to keep control of the business. Apax had originally considered selling just the Thomas brand to clear its debts but now plans to exit completely.
A spokesman for Chorion declined to comment. A spokesman for Apax had not responded to a request for comment at the time of publication.
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