In a deal that substantially bolsters its mindshare of preschoolers everywhere, Brit prodco HIT Entertainment has purchased Dallas, Texas-based Lyrick Studios, creator of veteran kids character Barney.

One of the major incentives behind the Lyrick pick-up was His Purpleness, says HIT CEO Peter Orton. ‘Barney is a brand that has demonstrated tremendous staying power. You’re talking about a property that has sold US$3.5 billion in licensed merchandise, and that has withstood the onslaught from newcomers in the preschool market, like Teletubbies and Blue’s Clues,’ says Orton, adding that Lyrick recently extended its broadcast agreement with PBS in the U.S. through to 2007.

Another key selling point, says Orton, was Lyrick’s strong presence at major U.S. retailers. For over a decade, Barney products have been distributed through mass retailers like Wal-Mart and Target, stores with which HIT does not have nearly as cozy a relationship. Once the deal is finalized, HIT will use Lyrick’s strong retail distribution network in the U.S. to push licensed products, merchandise programs and promotions for its properties, which include U.K. preschool sensation Bob the Builder, which began airing in January on Nick Jr.

HIT paid US$275 million (40% in cash, 60% in HIT stock) for the company, which in addition to Barney, also markets and distributes books and videos of kids properties like Wishbone, The Wiggles and Veggie Tales.For privately-owned Lyrick, the acquisition won’t be entirely painless. Last month, HIT announced that it had shut down Lyrick’s publishing arm, which Orton said had been losing US$5 million annually over the last few years. The move resulted in Lyrick shedding 80 full-time positions, roughly one-quarter of its staff. Concurrent with the announcement, HIT revealed it had licensed Scholastic to create and distribute Barney books (hitting shelves this August), for which the New York-based pubco will pay HIT a US$1 million annual guarantee.

As a wholly-owned subsidiary of HIT, Orton says the Lyrick brand will continue to exist, but the 12-year-old company will no longer independently develop its own properties. Except for Barney, all TV production will hail from HIT’s U.K. base in London. Additionally, HIT will pick up distribution of the Barney show and videos outside of the U.S., where the character’s presence is decidedly weaker, accounting for only 5% of the property’s licensing revenues.

HIT entered into discussions to buy Lyrick seven months ago. In December, it awarded Lyrick U.S. home entertainment rights to Bob the Builder, Angelina Ballerina and Kipper.