The Children's Place Retail Stores Inc has agreed to buy the ailing Disney Store retail chain in North America in a move that strengthens its presence in the newborn to age 10 category.

Disney Store, which has 313 outlets across the United States and Canada, sells apparel and toys based on Walt Disney's famous cartoon characters and is estimated to be losing $50 million a year.

Ezra Dabah, chairman and chief executive officer of The Children's Place, said: "We believe that by utilising our merchandising and sourcing expertise and leveraging our infrastructure we can further increase the level of profitability and build on the chain's positive momentum."

Under the terms of the deal the Disney Store will be held in a wholly owned subsidiary of The Children's Place and will have the exclusive right to operate the Disney Stores in the United States and Canada under a long-term license agreement.

It will continue to manufacture, source, offer, and sell merchandise featuring Disney-branded characters and will begin to pay royalties to Disney on the second anniversary of the closing of the transaction.

The Children's Place plans to invest up to $100 million into the remodelling and operations of the chain.

Mario Ciampi, senior vice president of store development and logistics for The Children's Place, will be appointed president of the Disney Store North America and will report directly to Ezra Dabah, chairman and chief executive officer.