The club is reversing into Soccer Investments, a shell company set up by Mr Edelson, a Manchester United FC director, to buy a football club and give it a market listing. Soccer Investments was floated in April with the backing of Schroders, Newton Asset Management and Abtrust, with capital of pounds 10m.
The deal will involve Soccer Investments issuing shares worth pounds 24m to Leicester City shareholders, and then renaming the new company Leicester City plc. The combined entity will have a capitalisation of about pounds 34m.
Soccer Investments shares closed at 101.5p on Friday, a penny and a half above their flotation value, and are expected to rise tomorrow on the news that the company has secured itself a Premier League club for a relatively modest price.
Leicester City retained its place in the Premier League last season and qualified for a potentially lucrative UEFA Cup campaign in Europe next season by virtue of winning the Coca-Cola Cup in April. The club recently signed a new three-year contract with its well-respected manager Martin O'Neill.
The takeover agreements were signed on Friday, and the due diligence process is expected to take another month. Once completed, the Soccer Investments board, which includes Mr Edelson and soccer pundit Alan Hansen, will resign. A new chairman will be recruited for the plc board, while Leicester chairman Tom Smeaton is expected to remain chairman of the football club subsidiary.
The relatively small value attached to the club is bound to disappoint shareholders in Leicester City. In May they voted overwhelmingly to change the share structure to allow the club to float in September, with valuations predicted to be up to pounds 40m.
"The value attached to the club is probably less than they would have hoped, but that is the nature of the market for football club shares at the moment," said a source close to the deal.