VTech Holdings said that it has entered into an agreement to acquire electronic toymaker LeapFrog Enterprises. VTech intends to buy 100 percent of LeapFrog's outstanding common shares in a cash tender offer tailed by a second-step merger.

As per the tender offer, the Hong Kong based company will offer US$1.00 a share for Class A and Class B shares of LeapFrog. The offer price represents a 75.4 percent premium on the ending price of Class A shares on February 4 2016. VTech noted that the net acquisition consideration totals to about 72 million US dollar.

The electronic learning toy maker will fund the acquisition with the internal resources. The tender offer, which will be open for a least of twenty business days, is anticipated to start on or about March 3 2016. The Boards of both firms have unanimously approved the tender offer and the acquisition is subject to fulfil certain conditions in the merger deal.

According to Bill Chiasson, LeapFrog Chairman, the acquisition prove to be a fantastic opportunity for its clients, shareholders and staffs. He also believes that the merger will reward its stakeholders with a notable premium from the present trading levels.

Bloomberg said that the merger announcement comes after a recent rumour of other alliance in the toy market. The US rivals, Hasbro and Mattel, have also "discussed merging." The shares of LeapFrog grew 72% to 97 cents in New York trading, close to the offer price.

LeapFrog that was struggling hard to compete with its rivals in the industry was squeezed by a wider fall in the tablet market. The firms's LeapTV video gaming platform also failed to catch the race and added to its struggle. In November, the US based company reported lower than anticipated sales in the second quarter and also said that it anticipated 2016 sales to contract significantly.

"They (LeapFrog) put all their eggs in one basket, the kids' tablet, which was a great idea back when other tablets were costing $700. They used to have a great business in stand-alone toys, but they executed poorly on the product front and their in-store advertising was awful."  Mercury News said quoting Gerrick Johnson, an analyst at BMO Capital Markets.

According to VTech, which sells smartwatches gaming consoles and tablets, the merger will enhance its products portfolio which concentrates on educating and entertaining the children globally. Prospective investment from VTech will aid LeapFrog to broaden its brand and achieve its goal of helping the kids' world.

VTech's merger deal with LeapFrog marks its identity as a leader in the toy market. The premium amount also seems to be rewarding for LeapFrog's stakeholders.