Animation house Nelvana hasconfirmed it is in talks "to investigate the possibility of a businesscombination".

The company's shares hit a record high on the Toronto Stock Exchange on Thursday, climbing to $41.25, up $3.45. Trading volume reached approximately 350,000 shares.

While Nelvana did not name the other party in the negotiations, rumours about a takeover point to France-based Corus Entertainment and Germany's Kinowelt Medien or EM.TV & Merchandising. A release issued by Nelvana on Friday stressed that discussions are at a "preliminary stage".

Nelvana's assets include TV and feature properties such as Franklin, Little Bear, Babar, Rupert and Pippi Longstocking, plus interests in children's publishing and merchandising. It recently expressed interest in the assets of Montreal-basedCinar Corp, expected to be on the sales block by year end and estimated to be worth anywhere from $235m to $765m.