Each time you defeat him you get a new scarf. The problem is he steals an item from you each time you lose. I recommend having a thief in party or having high pick pocket skills to steal his armour/weapons and slowly ware him out. Once out of material he is vulnerable to the slightest attack. Another strategy is to have a multi armed fighter hold down his arms while you strike his face. It's vulnerable since it is unprotected. If you give him a gift he can either join your party or become an npc shop keep who'll occasionally give you discounted uncommon items/rare drops.