Apax set to clinch Bob the Builder

THE US company bidding for Bob the Builder-to-Thomas the Tank Engine group HIT Entertainment announced today that it is pulling out, leaving the way clear for a rival 300p a share bid from private-equity firm Apax Partners.

Lions Gate Entertainment said that after conducting due diligence it decided that there was not enough potential in the company to justify a bid.

In a statement, chief executive Jon Feltheimer said that although a tie-up between the two companies would have been a strong strategic fit, the deal did 'not create the level of additional shareholder value that would be a prerequisite for moving forward'.

Lions Gate is the second potential bidder to pull out in as many weeks. Classic Entertainment, the US group that owns the rights to Mr Magoo, Lassie and the Lone Ranger pulled out last month.

The companies' interest in HIT follows a £489m bid from Apax Partners last month. HIT said at the time that it was open to offers after some investors described the approach as too low. Lions Gate's decision not to make a formal offer for HIT means the Apax deal will now go through. About 35% of HIT investors have already approved the Apax deal.

Lions Gate, a Canadian producer whose characters include Inspector Gadget and Clifford the Big Red Dog, also distributes Barbie DVDs. The Vancouver-based firm is one of the biggest independent film makers in Hollywood. Hits include Fahrenheit 9/11 and Monster's Ball, starring Halle Berry.

HIT chairman Peter Orton is unlikely to be too concerned about Lions Gate's decision to pull out. He will pocket more than £30m for his 6% stake whoever takes over the business.