Body Shop Agrees to Takeover by L'Oreal

By ELIZABETH KUSTA Posted 18 March 2006 @ 03:32 pm EET     Print     Reprint     E-Mail     Comments

LONDON (AP) - Body Shop International PLC, the British retailer that promotes natural-based cosmetics, said Friday it has agreed to be taken over by L'Oreal SA of France in a cash deal worth 652 million pounds ($1.14 billion).

Click to Enlarge A woman passes a Body Shop cosmetics store at the airport in Frankfurt, central ...

Body Shop will retain its separate identity and current management, the companies said.

"A partnership between our companies makes perfect sense," said L'Oreal Chairman and CEO Lindsay Owen-Jones. "Combining L'Oreal's expertise and knowledge of international markets with The Body Shop's distinct culture and values will benefit both companies."

He said the company does not plan to close any stores or make job cuts.

Body Shop was founded 30 years ago in Brighton, England, by Anita and Gordon Roddick, and there are now more than 2,000 stores around the world.

The Roddicks stepped down from managing the company in 2002, but have remained as non-executive directors and stand to bank around 117 million pounds ($204 million) from their 18 percent stake.

Anita Roddick, who will retain her current role as a consultant, said the company's values would not change.

"I don't see it as selling out," she said. "L'Oreal has displayed visionary leadership in wanting to be an authentic advocate and supporter of our values."

But criticism of the deal came Friday over the linkup between Body Shop, known for products that aren't tested on animals, and L'Oreal, which has yet to ban animal testing.

"It's ironic that a company well known for its anti-animal testing stance should sell out to one that tests on animals and which has yet to show its commitment to any ethical issues at all," said Ruth Rosselson of Ethical Consumer magazine.

Anita Roddick said Body Shop is about more than just animal testing and that a benefit to joining with L'Oreal is that Body Shop will be able to teach L'Oreal about issues such as "community trade, which is the best poverty eradicator in the world."

Owen-Jones also said L'Oreal wouldn't be able to stop animal testing overnight, but it does have the long-term plan of "joining Body Shop on the issue."

L'Oreal, which makes Maybelline mascara, Lancome skin cream and Armani and Ralph Lauren fragrances, is paying 300 pence ($5.25) per share for Body Shop, a premium of 34.2 percent over the share price on Feb. 21, the day before takeover speculation appeared in the media.

Steve Davies, a retail analyst at Numis Securities Ltd., said that considering the "public market doesn't value the retail business that highly," it would be difficult for Body Shop to reach this sort of price level on its own.

Body Shop's shares rose 10.5 percent to close at 296 pence ($5.18) on the London Stock Exchange. L'Oreal shares fell 0.3 percent to 74.35 euros ($89.89) in Paris.

The Body Shop has in recent years moved toward the luxury end of the cosmetics market to avoid direct competition with supermarket and drugstore mass merchandisers such as Tesco PLC in Britain and Wal-Mart Stores Inc. in the United States.

Body Shop reported a net profit of 27 million pounds ($47 million) in 2005, up from 21.7 million pounds a year earlier. It had sales of 419 million pounds ($733 million), up from 381.1 million pounds in 2004.

L'Oreal reported a 2005 net profit of $2.35 billion, down 50 percent from the previous year when it was boosted by a major one-time gain. Revenue rose 6.5 percent to $17.3 billion.

The offer is conditional upon required regulatory clearances. L'Oreal said it expects the acquisition to help earnings per share after Dec. 31.

___

On the Net:

<p><a href="http://www.uk.thebodyshop.com">http://www.uk.thebodyshop.com</a></p>
<p><a href="http://www.loreal.com">http://www.loreal.com</a></p>