Coolabi, the media rights owner, has confirmed that an understanding in principle has been reached for it to be bought by a venture capital firm for £4.2 million.
Investment vehicle North Promotions will pay 7.75p per share for Aim-listed Coolabi. Alongside Bagpuss, Coolabi also owns the greetings card brand Purple Ronnie.
The company has seen its revenues tumble in the last year, falling in the first six months of 2011 to £605,514 from £961,670 for the same period in 2010. Coolabi racked up pre-tax losses of £604,720 for the six months to the end of June.
Coolabi said in a statement: "In arriving at this position, the independent directors, having consulted with the major shareholders of the company, considered alternative options available to the Company including, inter alia, continuing its current strategy of organic growth and an equity fundraising.
"As a result, the independent directors have concluded that the potential offer is the best option presently available to the company."
However, Coolabi also warned that there is "no certainty that a firm offer will be made" by North Promotions.
The rights to Bagpuss were acquired by Coolabi in 2008 as part of the firm's £400,000 deal to purchase Licensing By Design.
In the same year, Bagpuss creator Oliver Postgate passed away, aged 83. He was also behind other children's TV favourites such as Noggin The Nog, Ivor The Engine and The Clangers.