A private equity consortium led by Archer Capital is offering 80 cents per share for the firm.
The offer comes several months into a restructure after revealed a dip of almost 60 per cent in net profit for calendar 2007.
The profit decline, first heralded in a trading update last November, sent Funtastic stock plummeting well below last year's high of $1.93.
Shares of Funtastic had jumped almost 30 per cent after the takeover bid was announced, peaking at 73 cents.
The consortium has established an 18.8 per cent stake in the toy firm after ABC Learning Centres agreed to sell its 22 million shares.
The consortium now will conduct duel diligence on Funtastic for a 100 per cent acquisition. Conditions include the consortium being satisfied it can fund the transaction.
"Although the proposal is highly conditional, the board of Funtastic considers that, given the consortium's acquisition of shares in Funtastic, early disclosure to ASX of the approach is warranted," the firm said in a statement.
"Funtastic is not in a position to give any assurance that the proposal's pre-conditions will be satisfied, that its board's evaluation will lead to a recommended proposal or that the proposal will proceed."
The firm's net profit was down 57.3 per cent to $5.2 million for calendar 2007 after a one-off abnormal stock provision of $6.0 million before tax.
It expects to report a net profit of between $13.7 million and $15.1 million as its turnaround strategy gains momentum.