Entertainment Rights (ER), the UK children’s media specialist, has agreed to buy its American rival Classic Media Holdings for £106.9 million.

The deal means that Classic franchises, from Lassie to the Lone Ranger, will join forces with ER’s Postman Pat, Rupert Bear and Basil Brush — possibly, the British group suggested, in the same television programmes, films and online content.

“We’ve already got a meeting between an animated Lassie and Jess [Postman Pat’s cat] in the pipeline,” Mike Heap, the ER chief executive, said.

The acquisition virtually doubles the size of ER and means it becomes the largest owner of children’s brands outside the US studio heavyweights, such as Warner Bros and Disney.

ER, already in 170 countries, said the enlarged portfolio would give it a greater presence in America, the world’s largest market, both on the air and in retail outlets through merchandise sales. The deal will boost ER’s share of revenues from the US to about 50 per cent, from its current 8 per cent.

Mr Heap added that ER would now be aiming to secure “big TV deals around the world”, and cited India and China as target markets.

The enlarged group’s portfolio will cover ages from pre-school to teens, ER said, providing a library comprising about 8,700 episodes.

ER added that the Classic portfolio, which also includes stalwarts such as Casper the Friendly Ghost, Dick Tracy and George of the Jungle, would be “exploited to create new revenue streams” that would include expanded licensing operations, music and online outlets.

The acquisition will be paid for with £86.5 million in cash and the issue of up to £20.4 million in shares. ER is raising £71 million through an underwritten placing and open offer of 249 million new shares at 28.5p to fund the deal.

Mr Heap, a former Warner Bros executive who joined ER in 1999, said that ER had been targeting a suitable deal for four years, but would not be looking to other territories for further tie-ups.

Since 1999, the number of children’s channels has increased eightfold to around 600. In that time ER’s library of programming has expanded 70 times over, to about 3,500 hours.

Both groups employ about 80 people and were described as “mirror images” by Mr Heap.

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