Kermit the Frog and the rest of the Muppets are heading home after their German parent company agreed to sell them back to their original owners.

The children of Muppets creator Jim Henson are buying the company for just $89m (�56m).

They had sold it to EM.TV & Merchandising at the peak of the stock market boom for more than seven times that amount - $680m.

But EM.TV has since sold off parts of the business including the Sesame Street characters and a stake in the children's network Noggin for about $200m.

The deal ends a two-year search for a buyer.

Among the possible new owners were Disney, children's programming magnate Haim Saban and former TV executive Dean Valentine.

EM.TV said the offer from the Henson children "was in the end the most attractive".

Paying off debts

Five Henson siblings will sit on the company's board.

Two of them, Brian and Lisa Henson, will help manage the business and its puppets.

"We will be actively exploring new and expanded strategic relationships," Brian Henson said in a statement.

Five weeks ago Disney chief executive Michael Eisner said at an industry conference that he thought the company was close to a deal for Henson.

Disney had been on the verge of buying the Muppets in 1990 but pulled out when the company's driving force, Jim Henson, died suddenly.

EM.TV has been anxious to raise money to pay off its debts and improve its cash position.

Its shares rose more than 7% when the deal was announced.