When toymaker Jakks Pacific Inc. announced last week it had signed a deal with the Ultimate Fighting Championship league to develop action figures of popular fighters, analysts saw the move as a surprising comeback punch.

Just three months ago, the Malibu-based Jakks lost a major revenue source when World Wrestling Entertainment Inc. decided to move its action-figure license to Mattel Inc. in El Segundo. Although Jakks quickly returned fire with the announcement of a license with TNA Wrestling Inc. it was little consolation. TNA stands for the little-known Total Nonstop Action league, a fledgling rival of the dominant WWE.

Meanwhile, the deal with the suddenly popular UFC a "Mixed Martial Arts" combat sport that combines punching, kicking and wrestling looks like the company's back in the fray.

"It's a great deal for them," said Arvid Bhatia, an analyst with Sterne Agee Financial Services Inc. "When you combine TNA and UFC, they should for the most part replace the revenues they will lose from WWE. So investors should be less concerned about the loss."

Edward Woo, an analyst with Wedbush Morgan Securities in Los Angeles, estimates that the two new deals will recover about 50 to 65 percent of the revenues lost from WWE.

"Without knowing the numbers, I would say this is closer to a big deal than a small one for Jakks," he said.

The four-year agreement gives Jakks a license to develop a line of UFC dolls that will launch in 2009. Besides big-name fighters including Chuck "Iceman" Liddell and Anderson "Spider" Silva, the license also allows the company to make toys based on the trademarked octagonal ring where the fighters engage in battle.

But most significantly, Jakks has caught UFC just as its popularity is spreading from fringe-group fans to the mainstream culture.

"It's a trend-based business and we deliver on those trends," said Jeremy Padawer, vice-president of branded entertainment at Jakks. "The growing popularity of UFC heavily influenced my decision to approach them in the first place."

Dana White, president of Las Vegas-based UFC, said the company that runs the combat sport selected Jakks from a competitive field.

"We talked to a lot of different companies when we did this deal, and Jakks were the people we wanted to go with," White said. "As we've built this business, doing a merchandising deal like this with a major toy manufacturer has been one of the biggest goals. These guys are one of the top three action figure toy companies in the world."

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