L’Oréal to sell Body Shop to Brazil’s Natura for €1bn

As Britain struggles for political stability, one of the country’s retailing institutions is close to gaining a permanent new home.

Body Shop, the purveyor of coconut body butter and seaweed cleansing gel, is set to become part of Natura Cosmeticos after the Brazilian cosmetics firm entered exclusive talks to acquire the British chain from L’Oréal.

Natura made a firm offer that values the UK retailer at €1bn, the companies said. The €1bn value of the proposed transaction includes debt.

A deal would open a new chapter for Body Shop, which was founded in 1976 by British entrepreneur Anita Roddick and has spent the last decade under the ownership of L’Oréal.

For much of that period, the 3,000-store business struggled to contend with tough competition, leading L’Oréal to announce in February that it was exploring its options.

In Natura, it will gain an owner that shares its ideology in terms of ethics and natural products.

For L’Oréal, the planned transaction is “good news given the underperformance of the division in past years,” Hermine de Bentzmann, an analyst at Raymond James, said. L’Oréal shares in Paris have risen over 15% in the past year, to value the firm at €106.5bn.

Natura shares have gained 42%, valuing it about $4.3bn (€3.82bn). An acquisition by Natura would represent a major expansion of the Brazilian cosmetics company’s retail activities, following up on its $70m purchase of Australia’s Aesop in 2013.

“The ethical values and expertise of Natura make it the perfect new owner for The Body Shop to accelerate the rejuvenation of the brand and its future expansion,” the UK chain’s chairman and chief executive Jeremy Schwartz said.

For Natura, the move “will further strengthen our strategic aims of becoming more international and more diversified in terms of brands and sales channels,” CEO Joao Paulo Ferreira said.

The Brazilian company looks to have beaten off competition from private-equity bidders.

CVC Capital Partners, Advent International and Investindustrial Advisors were among firms that also made proposals to L’Oréal, according to sources. Body Shop operates across 66 countries. Its operating profit fell 38% €33.8m last year.

Natura is coming out of a tumultuous year that saw the exit of CEO Roberto Oliveira de Lima, whose attempt to raise prices backfired. Sales rose 0.2% last year to $2.43bn. The Body Shop’s total sales, including e-commerce and franchises, fell 2% to €1.48bn.