The firm behind children's characters Bob the Builder and Thomas the Tank Engine, Hit Entertainment, has received a £489.4m ($935m) takeover offer.
Hit sells Bob the Builder merchandise around the world
The bid is pitched at 300 pence per share. It comes from a newly-created company, Sunshine Acquisition, formed by investment firm Apax Partners.
Hit's independent directors are recommending the offer to shareholders.
Takeover rumours forced Hit to announce on Friday that it was in late stage talks with a potential buyer.
Hit's shares jumped 17% on Friday to 293p, and climbed again on Monday, up 4.1%, or 12 pence at 305p.
Can Apax fix it?
Sunshine Acquisition said its offer had the support of Hit Entertainment shareholders holding 35.5% of the company's shares.
Apax Partners said Hit was "uniquely positioned in the global market for pre-school children's entertainment" with a history of developing "breakthrough characters" and a strong distribution platform.
"We are excited by the potential to take Hit to the next stage of its development through an expansion of its existing business platform, launch of the newly established US Digital Pre-school Channel, investment in Hit's key brands, and acquisitions of new characters," Apax said.
Hit chairman Peter Orton said the offer provides the "certainty of cash" for development.
Hit's share price has declined amid difficult trading conditions, making it an attractive takeover target.
Dollar hits dino
The company, which also owns the rights to Barney, a purple dinosaur who is a TV star in the US, has seen its profits dented by the weakening dollar.
Its other characters include dancing mouse Angelina Ballerina and adventurous baby penguin Pingu.
Sluggish consumer demand on both sides of the Atlantic and retailers negotiating harder for lower prices have taken their toll.
In recommending the offer, the firm's independent directors said trading would continue to be "constrained" by these factors.
Although they believe that Hit would deliver value to shareholders in the medium-to-long-term, they warned that its strategy carries "some degree of execution risk", and presented Apax's offer as a chance for shareholders to realise the value of their investment.
The offer is pitched at 20% above the closing price of Hit shares on 17 March, the last day before takeover talks were confirmed.
Among the risks ahead, Hit cited the fact that the US Digital Pre-School Channel has not yet been launched. Hit is also hoping to negotiate new, long-term contracts for its major brands on US analogue TV channels.
Other potential pitfalls include the impact of new technology on buying patterns and the firm's ability to refresh its brands, some of which have shown recent declines, they said.
Barney the Dinosaur and boy band The Wiggles were singled out.
Hit sells Bob The Builder products in more than 130 countries.
It acquired the rights to Thomas the Tank Engine after it bought Gullane Entertainment in 2002.