The deal releases the value of Acorn's 24 per cent stake in ARM Holdings, the highly successful microchip maker whose shares have soared since coming to the market a year ago.
Investors had been pushing for a deal as Acorn's stock market value had been less than the value of its stake in ARM, which it spun off into a separate entity in 1990.
Under the terms of the deal, Acorn shareholders will receive two shares in ARM for every five Acorn shares held. The deal values Acorn shares at 279p, a 14 per cent premium to their previous closing price.
The takeover has already secured the agreement of shareholders accounting for more than 50 per cent of the equity. These include Dr Hermann Hauser, one of the founders of the original Acorn computer company. His stake in ARM will be worth around pounds 7.5m
In two separate deals, Acorn is also selling its fledgling digital television set-top box business to Pace Micro Technology for pounds 200,000. It is also in talks to sell its software development business to Stan Boland, Acorn's chief executive. Acorn said it would have been unable to fund the development required to move the two businesses forward.
Acorn said it believed the Morgan Stanley deal was the "best available solution" for shareholders. The company has been struggling badly and last year recorded an operating loss of pounds 10m on sales of pounds 11m. Its only profits came from the sale of shares in ARM and its share of ARM's profits.
"I am delighted we have been able to generate a value- enhancing solution that enables Acorn shareholders to participate directly in ARM's extraordinary success," said Gordon Owen, the Acorn chairman.
Acorn shares closed 9.5p higher at 254.5p, compared to their low point of just 57p in November. ARM closed 22.5p higher at 695.5p.