Animation giant Cookie Jar Entertainment has emerged top of the heap to acquire U.S. global brand management company DIC Entertainment Holdings for US$87.6 million after a lengthy bidding process, though legal action taken late Friday by one of DIC’s partners has put a cloud over the deal.

American Greetings Corp., which owns the Strawberry Shortcake property that DIC licenses, on Friday obtained a temporary restraining order in an Ohio court to block the proposed sale of DIC to Cookie Jar on grounds it could ‘violate’ the rights holder’s property and ’cause irreparable damage to the popular Strawberry Shortcake brand.’

Cookie Jar had no comment on the legal action, which will likely mean further court dates to consider a preliminary injunction to block the deal.

American Greetings said it is open to talks with Cookie Jar, but only learnt of the merger deal after it was inked by DIC and its Canadian suitor.

The Cookie Jar/DIC deal was revealed early Friday. Pending shareholder approval and what the courts say, Burbank, CA-based DIC, which has around 200 employees and 3,000 hours of programming in its library, will become a Cookie Jar subsidiary, with DIC founder and CEO Andy Heyward staying on as its president.

The newly combined Cookie Jar-DIC entity will emerge as an indie animation giant with around 6,000 hours of programming in its library, according to Cookie Jar CEO Michael Hirsh.

‘With our strength in producing shows and getting them distributed around the world, and [DIC’s] strength in merchandising and licensing, we get a great kids company,’ he tells Playback Daily.

The terms of the merger agreement call for Cookie Jar to acquire DIC’s issued and outstanding common stock of around US$31 million, to assume around US$42 million in debt, and pay another $14.1 million in transaction fees and DIC executive bonuses.

In return, Cookie Jar would acquire a stable of proprietary and licensed brands including Strawberry Shortcake, which has earned $3 billion in retail sales since 2004 — when DIC relaunched the brand that was originally conceived by Heyward and then-Nelvana executive Hirsh in 1984 as the TV special Strawberry Shortcake and the Baby Without a Name.

Hirsh says he and Heyward have known each other for around 25 years, and that he understands the inherent value locked into the DIC library.

The licensing giant’s other properties include Inspector Gadget, Mommy & Me, The Beginner’s Bible and Horseland.

The merger deal follows DIC retaining Bear Stearns to explore strategic alternatives for the U.S. company. After several rounds of bidding by potential suitors, DIC and its bankers in mid-May opened exclusive negotiations with Cookie Jar and its team, which included Los Angeles-based president and COO Toper Taylor and CFO Scott McCaw.

On June 18, DIC executives and board members received a final offer from Cookie Jar, and a day later Heyward pledged his 49% stake in DIC to the tie-up with Cookie Jar.

‘We are thrilled to be joining forces with Cookie Jar’s highly respected team. Our two organizations are a perfect fit, with compelling brands, strong licensing and merchandising capabilities and a commitment to quality programming that reflects the needs and aspirations of children and families around the world,’ Heyward said in a statement Friday.

After two all-night sessions by Cookie Jar lawyers, Hirsh emerged Friday to unveil a deal that would extend his company’s reach into the emerging digital universe.

‘The world of downloads is beginning to build as a business. DIC has a successful online downloadable website. Having the combined library will provide a greater pipeline of programming, and allow us to put more resources behind that pipeline,’ Hirsh explains.

The deal for DIC also would also bring Cookie Jar a one-third stake in KidsCo, an international kids television channel that is also owned by NBC Universal and Corus Entertainment, and which is managed by former CHUM executive Roma Khanna, now with NBC Universal’s Global Networks division.

Cookie Jar was also able to finance the proposed DIC merger amid the current credit crunch, with backing from key investors OMERS (Ontario Municipal Employees Retirement System) and Birch Hill Equity Partners, and financial backing from RBC Capital Markets and Bank of America.