Pixar is the firm behind animated hits such as The Incredibles

The tie-up between two of the biggest names in animation was described as a "near-perfect strategic fit" by investment bank Merrill Lynch.

The all-share deal will see Pixar boss Steve Jobs join Disney's board.

Shares in Pixar, the firm behind Toy Story and The Incredibles, rose 3% on Wall Street on Wednesday, although Disney's shares were little changed.

Both companies announced the deal - which was widely expected by the market - after the close of US trade on Tuesday.

Impressive transaction

"We view the Disney-Pixar combination as a near-perfect strategic fit," said analyst Jessica Reif Cohen in a Merrill Lynch research report.

I give Bob Iger tons and tons of credit for taking this on and working in the interest of shareholders Harold Vogel, Vogel Capital Management Check Pixar's shares Check Disney's shares

"Pixar's family-oriented content meshes well with Disney's brand and is an important cog in its theatrical/home video distribution, theme parks and consumer products divisions."

Disney chief executive Robert Iger has been working to revive relations between the two companies, which have enjoyed success in recent years from several animated features.

However, Mr Jobs, who also runs Apple Computer and controls more than half of Pixar's stock, publicly fell out with previous Disney boss Michael Eisner over a new distribution agreement.

Before the takeover deal was announced, Disney's distribution deal with Pixar was due to end later this year.

"I give Bob Iger tons and tons of credit for taking this on and working in the interest of shareholders," said Harold Vogel, of Vogel Capital Management.

"It's a pretty impressive transaction. It's small [in financial terms] but it's large for Disney in terms of change in culture and what it can do for Disney around the world."