L'Oréal mulls £650m Body Shop bid

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The Independent Online

The Body Shop, the cosmetics retailer famed for its ethical stance, faces a potential takeover bid from the French make-up giant L'Oréal.

As rumours rippled across the City yesterday, and The Body Shop shares leapt on the back of takeover speculation, L'Oréal was forced to release a statement admitting it is considering a "possible offer" for the company founded by Dame Anita Roddick.

The Body Shop shares rose 18p to 265p on the news, valuing the company at £570m, and the 18 per cent stake held by Dame Anita and her husband worth more than £100m. Analysts suggested L'Oréal might have to pay up to £650m for The Body Shop if it proceeds with a bid.

Dame Anita was in Louisiana yesterday campaigning for the release of the so-called Angola Three - two Black Panther prisoners who have been kept in solitary confinement for 34 years after convictions for murder and robbery. (The third inmate died recently).

Her office declined to comment on how she would feel about a takeover of the company she built from scratch by L'Oréal. The Body Shop admitted it was taken by surprise by the news, and called a sudden board meeting yesterday evening. Earlier in the day the group denied talk that management asked Merrill Lynch to advise them on a buyout that would take the company off the stock market. Sources close to The Body Shop believe the Roddicks have been considering a sale for the past 18 months.

Fidelity, its largest institutional shareholder with 13 per cent, would almost certainly accept a deal at anything close to £3 a share. Ian McGlinn, a friend of the Roddicks who provided start-up money in the 1970s, holds a 23 per cent stake.

Although a tie-up between the companies would seem to present a culture clash, L'Oréal is moving in The Body Shop's direction. It has banned animal testing and spent £10m last year to fund alternative ways to test cosmetics.

L'Oréal would not reveal if it has hired bankers to put together a deal, but confirmed any offer "is likely to be solely in cash".

After The Body Shop board meeting last night, led by the chief executive, Peter Saunders, the company released a statement in which it noted the interest from L'Oréal but it "has not received any proposal".

Analysts suggested L'Oréal is disadvantaged by the leak of its intentions, as rival bidders will be alerted to the possibilities of The Body Shop being in play.

Richard Ratner, of Seymour Pierce, said: "The key issue is to get the Roddicks and McGlinn onside. Given that they were sellers some time ago at a mooted price of about 140p when the company was [in effect] put up for auction, we would be very surprised if the levels being talked about didn't appeal to them."

L'Oréal is a global giant listed on the CAC 40 in Paris, and has been headed by the flamboyant Sir Lindsay Owen-Jones for the past 20 years. Sir Lindsay, or OJ to friends, steps down as chief executive in April to be replaced by Jean-Paul Agon.

Buying The Body Shop would revamp L'Oréal's image at a stroke, while also bringing it to the attention of critics.

Anita Singh of Peta (People for the Ethical Treatment of Animals) said: "Big companies are learning that consumers care about compassionate cosmetics. We hope The Body Shop convinces L'Oréal to adopt more ethical standards."

The Body Shop almost invented the concept of ethical shopping, becoming a household name in the 1980s. In a single Brighton store in 1976, the Roddicks began selling toiletries from the Third World which were packaged in recycled materials.

The company issued a profits warning in January this year after poor Christmas sales.

Because she's worth it - weighing up the value of Roddick's ethical empire

THE BODY SHOP

Profits: £18m

Slogan: Made with passion

Public face: Dame Anita Roddick, though she stepped down from day-to-day running of the company in 2002

Founded: 1976, in Brighton

Signature product: Mango body butter

Quote: "I was a natural outsider and I was drawn to other outsiders and rebels. James Dean was my schoolgirl idol" - Dame Anita Roddick

L'OREAL

Profits: £1.1bn

Slogan: Because you're worth it

Public face: Scarlet Johansson, who recently signed up as the company's "new face"

Founded: In 1909 by the French chemist Eugene Schuller

Signature product: Juicy Tubes lip-gloss

Quote: "In a difficult environment we have continued to advance thanks to three strategic successes: our innovative approach, our offensive long-term strategy in the United States and our all-out drive to move into new and emerging markets" - Sir Lindsay Owen Jones

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