Italians tie the knot with Tie Rack for pounds 22m

TIE RACK, the 1980s retail success story which has fallen on tough times, succumbed to a takeover bid yesterday when it agreed a pounds 22.6m cash deal from one of its Italian suppliers.

Frangi, a privately owned tie and scarves business, is offering 43.5p per share for Tie Rack. This is a 24 per cent premium to the closing price before Easter, but a far cry from the 203.5p reached in early 1997.

The offer has received irrevocable acceptances from shareholders of 45.6 per cent of the equity. These include Vadep, an obscure Swiss-based trust controlling 37 per cent of Tie Rack, and Roy Bishko, Tie Rack's founder who owns 4.9 per cent.

He is staying on as co-chairman and will net a total of pounds 1.1m. He is taking pounds 500,000 in cash and reinvesting the rest in the new company, Frangi Investments, of which he will hold 11 per cent. This could rise to 20 per cent on the exercise of share options.

Frangi said it was buying Tie Rack as it wanted to become more vertically integrated. It designs and makes ties and scarves for clients such as Calvin Klein and DKNY, but has no stores.

Tie Rack, which operates 426 shops in 30 countries, has struggled in the past year, issuing four profit warnings as the strong pound and the fall in tourist spending hit hard. Full-year losses are expected to be pounds 7.5m. "This was the best thing for Tie Rack," said Mr Bishko, who said he did not regard the takeover as a disappointment.

The deal ends a rollercoaster ride for one of Britain's few remaining niche retailers. It came to the market in 1987 on a wave of enthusiasm for similar companies such as Sock Shop. The issue was 85 times over-subscribed but the shares did not perform well on their debut. Other institutional investors yesterday expressed dissatisfaction with the deal. They questioned whether all shareholders had been treated equally.