UK-based film company HandMade Group has bought the US toon studio behind Kappa Mikey, Ellen's Acres and Thumb Wrestling Federation and partnered with National Geographic to create a new kids TV production company called HandMade Kids.

Under the deal, HandMade Films will acquire Animation Collective for US$12m, and is putting its combined assets together with National Geographic Kids Entertainment (NGKE) to form the new children's entertainment prodco. Animation Collective founder Larry Schwarz and his team will oversee creative efforts at HandMade Kids.

HandMade will invest £3.4m (US$5.6m) in working capital to kick-start the new firm, and the US$12m pricetag for Animation Collective is dependent on profit performance over a three-year period. HandMade will pay an initial sum of US$1.06m in cash and shares, with approximately US$560,000 to be paid in cash on completion. The deal includes assumed debt of US$2.5m.

The new company has also secured its first acquisition deal, with the Duchess of York, Sarah Ferguson, to adapt her Tea With Ruby books for television. The books follow a little girl who tries to perfect her manners in time for tea with the Queen. The Duchess's Little Red books are also to be adapted by HandMade Kids, and the former royal will also become a non-exec director of the company.

The total value of the deals setting up HandMade Kids, including the acquisition of Animation Collective and the book rights and issuing of new HandMade shares, is understood to be in the region of £17m.

As well as its slate of original content, the New York-based JV will have the exclusive rights to NGKE programming, including Mama Mirabelle’s Home Movies, Toot & Puddle, Are We There Yet? World Adventure and Iggy Arbuckle, which has sold in more than 125 territories worldwide. HandMade Kids also has its Eloise property, which it is extending into feature film, with Eloise in Paris is in pre-production, and animated film, with Adventures of Eloise, Africa in production.

As part of the move, former MTV Networks International sales chief Debbie Back has been named president of sales for HandMade Kids, while VP of sales will be Jennifer Liang, who also comes from MTV Networks. Simon Flamank, former CEO of TV-Loonland, is chief operating officer/chief financial officer. The move follows the departure of Nat Geo Kids president Donna Friedman Meir after six years in July.

“The proposed launch of HandMade Kids creates one of the leading independent producers of children’s content for TV," said Patrick Meehan, exec chairman of HandMade. "Together with the Duchess of York’s children’s properties and our iconic US children’s character Eloise, HandMade Kids will create the perfect environment for NGKE and Animation Collective to generate the best in quality programming.”

Handmade, which was set up by ex-Beatle George Harrison in the 1970s to finance Monty Python's Life of Brian, is understood to have also signed the Duchess for a six-part series for National Geographic Channel re-tracing the journey of great women explorers, called In the Footsteps Of.