To their millions of fans, Bob the Builder and Thomas the Tank Engine are the grinning embodiment of an animated utopia shaped by happy friends and the magic powers of modelling clay.

To their millions of fans, Bob the Builder and Thomas the Tank Engine are the grinning embodiment of an animated utopia shaped by happy friends and the magic powers of modelling clay.

But the harsh business reality behind the cosy televisual universe of Bob's builders yard and the rail network of Sodor Island was yesterday thrown into sharp relief when three suitors - including the owner of Clifford the Red Dog - stepped up their efforts to buy HIT Entertainment.

The British company, which owns the rights to a host of lucrative children's television brands including Bob the Builder and Thomas the Tank Engine, said it was investigating approaches from two new bidders days after announcing it had accepted a £489m takeover deal from a private equity firm.

The bidding battle highlights the fierce competition for a stake in the burgeoning industry focused on keeping youngsters entertained while sat in front of a television screen.

Latest estimates put the global market in children's DVDs and videos at £24bn a year. Toy sales, mainly spin-offs from television programmes, are worth an additional £31bn.

It is a trade in which Britain, with its host of small production companies dedicated to making hits from Bob the Builder to Noddy, has excelled. Last year, 20 of the 25 top selling children's programmes in the UK were made in Britain - overturning America's predominance in other entertainment sectors.

The success of dedicated children's channels, such as the BBC's digital offering, CBeebies, and private ventures such as Nickelodeon, has also boosted demand for high quality content.

Analysts said yesterday that it was therefore unsurprising that foreign buyers were now queuing for a share of the British success in the sector.

One senior financier with knowledge of the HIT negotiations said: "The model for this market has been proven over and again. You take a popular character, engage youngsters and wait for the money to roll in from allied sales of merchandise.

"The problem is securing that popular character - whether it is a Bob, Pooh, Noddy or Pingu. That is why HIT is a tempting target - they have a track record for producing characters that have an appeal in almost any country."

HIT Entertainment, set up with a £300,000investment by the entrepreneur Peter Orton, has scored a series of successes with brands such as Barney the Dinosaur and Angelina Ballerina. In 2003, it had revenues of £168m, of which less than 10 per cent came from sales to broadcasters, underlining the importance of merchandise in achieving profits.

The company announced last month it had agreed a £489m sale to Apax Partners. But yesterday it confirmed it had received rival approaches from Canadian media group, Lions Gate, which owns distribution rights for Care Bears and Clifford the Big Red Dog, and a third unnamed suitor, thought to be Classic Media, which has the rights to Lassie.

Bob the Builder

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Teletubbies

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Winnie the Pooh

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Mickey Mouse

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Postman Pat

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Noddy

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