Outlook: Tie Rack downer

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The Independent Online
TWO MONTHS ago, this column wrote that if Roy Bishko, the perennially upbeat South African who runs Tie Rack, were to attempt to take his company private at currently depressed prices, the City would string him up, given the loss of shareholder value that has occurred in the last two years.

Well, yesterday Mr Bishko duly unveiled a public to private bid. The price is a little bit higher than it was then, but by not enough to justify a lesser sentence. Indeed, the terms might reasonably call for crueller punishment than a mere hanging - Mr Bishko, unlike everyone else, comes out of it smiling.

Strictly speaking, yesterday's pounds 22.6m bid is from one of Tie Rack's suppliers, the Italian silk tie and scarf producer, Frangi. However, Frangi generously insisted that it would not be prepared to do the deal unless guaranteed of Mr Bishko's continued involvement. As a result, for little more money than he is getting for his existing 4.9 per cent shareholding in Tie Rack, Mr Bishko ends up with a 20 per cent stake in the ongoing business, Frangi Investments. Not bad, not bad at all for someone who has lost so much for so many.

As it happens, outside shareholders have little option but to accept Frangi's insulting 43.5p a share offer; irrevocable undertakings to accept, mainly from an obscure Swiss trust, have already been given in respect of 45.6 per cent of the share capital. But to add insult to injury, they are even being advised to do so by the spineless HSBC Investment Bank, which has been helping independent directors form an opinion on the bid.

According to HSBC, the transmutation of Mr Bishko's 4.9 per cent stake into a 20 per cent one is explained by the leveraged nature of this transaction. Furthermore, HSBC insists, Tie Rack requires quite a lot of investment going forward, involving considerable risk. There is no guarantee that the turnaround is going to be achieved. The fact that at the last count the business contained pounds 11m of cash - amounting to about half the value of the offer - is a temporary and seasonal phenomenon, HSBC says.

There may not be much ordinary shareholders can do to halt this shabby little buyout. But they should be careful not to involve themselves with Mr Bishko again.