Body Shop dives as Mexicans quit takeover talks

Body shop shares collapsed yesterday after the cosmetics retailer said takeover talks with Omnilife, the Mexican retailer, had ended.
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The Independent Online

Body shop shares collapsed yesterday after the cosmetics retailer said takeover talks with Omnilife, the Mexican retailer, had ended.

Body Shop shares fell 18.5p to 96p, valuing the company at just £201m. The talks with Omnilife had put a potential value of about £350m on the chain founded by Anita Roddick.

It is thought the talks foundered on the inability of the privately owned Omnilife to secure sufficient funding.

When Body Shop revealed earlier this month that it was in talks which could lead to an offer it stressed that the negotiations were at a preliminary stage. Yesterday it said: "Since that time no formal process has been initiated and no proposals made and these preliminary discussions have now ended." The implication is that the talks barely started and that Omnilife may not even have hired a full team of advisers for the deal.

Some analysts speculated that other bidders may soon emerge. "Omnilife wasn't the first interested party, and it's not going to be the last," one analyst said, referring to reported interest from Lush, the rival cosmetics retailer, earlier this year.

But Rowan Morgan, an analyst at Teather and Greenwood, was sceptical. "What's interesting is that Lush didn't show its hand when Body Shop said it was in talks with Omnilife," he said.

He added that Body Shop had "the feeling of yesterday's brand" and was not in a market where a company could make a big acquisition and turn it around quickly. Other analysts said the Roddicks' willingness to sell was now out in the open.

If a deal with Omnilife had gone ahead it would have ended 25 years of independence for Body Shop which was set up by Ms Roddick in 1976 with a £4,000 bank loan. Under the terms of the planned deal their stake would have been worth £87.5m; now, its value has fallen to £50m.

Omnilife, based in Guadalajara in Mexico, was set up in 1991 and sells nutritional supplements direct to consumers via an Amway-style marketing approach. It was founded by Jorge Vergara Madrigal and has operations across Latin America.

Body Shop said it was now back to "business as usual". The company's statement said: "Body Shop ... continues to pursue ... its three principal objectives: to enhance the Body Shop brand through a focused product strategy and increased investment in stores; to achieve operational efficiencies in its supply chain by reducing product and inventory costs, and to reinforce its stakeholder culture."

Body Shop has issued two profits warnings in the past seven months due to management mistakes and increased competition from rivals such as Boots and the major supermarkets. In May it reported halved profits of £12.8m after introducing too many new products and phasing out popular lines.