The Top Shop to Burton retail group, Arcadia, has accepted a takeover bid from BHS owner Philip Green.

Arcadia businesses

Top Shop Top Man Miss Selfridge Burton Dorothy Perkins Evans Wallis

His offer of 408 pence a share for Arcadia values the company at �770m ($1.2bn).

The deal - when completed - will create one of the biggest clothing retail businesses in the UK, and will overtake Marks & Spencer as the biggest womenswear retailer.

The chief executive of Arcadia, Stuart Rose, stands to make about �23m through his share options.

Takeover saga

Mr Green - who also owns the Mark One clothing chain - first approached Arcadia with a takeover offer last month.

Philip Green will become a major player on the High Street

But his opening bid of 365p per share was rejected as being too low.

He then came back with a higher offer of 408p a share, backed by Arcadia's biggest shareholder, the Icelandic retailer Baugur.

Baugur was to buy the Top Shop, Top Man and Miss Selfridge brands as part of the deal.

It then emerged that police were investigating Baugur over possible fraud.

As a result, the offer was changed and on Thursday it was revealed that the pre-condition to sell the stores to Baugur had been dropped, and that Baugur had agreed to sell its stake to Mr Green.

Extra costs

In a short statement on Friday, Arcadia said that the deal represented a value which the board would recommend to the company's shareholders.

Arcadia boss Stuart Rose stands to make more than �25m from the deal

It also announced a second interim dividend of 4p a share for the year ending in August 2002.

Taveta Investments, Mr Green's bid vehicle, had confirmed that shareholders would still get this dividend if it made an offer for the group.

The dividend, together with employees' share options payments, means Mr Green could eventually pay up to �855m for Arcadia.

Reviving fortunes

Philip Green has been credited with engineering a dramatic turnaround at BHS.

He bought the business for �220m in early 2000, and has seen profits at the firm rise from �12m to �92m.

He has been keen to expand his retail empire and was involved in merger talks with Woolworths in June this year, and takeover talks with Marks and Spencer in March last year. But neither set of talks led to a deal.

Arcadia's chief executive Stuart Rose has also been credited with reviving his company's fortunes.

He joined Arcadia in November 2000 and decided to focus the business on its main chains, selling off brands such as Principles and Warehouse to management.

His strategy won the approval of investors, and the company's share price rose from less than 50p in late 2000 to 388p by the close of trade on Thursday.

Mr Rose now stands to make �23.1m from the takeover through his share options, a company spokeswoman said.

Arcadia shares rose 16.5p to 404.5p on Friday.