Mexicans serenade Roddick with £350m Body Shop bid

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Body Shop International, the "green" cosmetics retailer founded by Anita Roddick, surprised the City yesterday with the announcement that it is in talks that could lead to it being taken over by a Mexican company for £350m.

The potential bidder is the little known Grupo Omnilife, a privately owned retailer which specialises in the Latin American distribution of nutritional supplements via Amway-style direct network marketing.

If a deal goes ahead it would end 25 years of independence for Body Shop, set up by Ms Roddick in 1976 with a £10,000 bank loan. It would also net a fortune for Ms Roddick and husband, Gordon, who own 25 per cent of the shares. Under likely terms their stake would be worth £87.5m.

However, Body Shop's statement to the stock market indicated that the deal was by no means a certainty. "Discussions are at a very preliminary stage, and there can be no assurance that an agreement will be reached," it said.

Body Shop shares jumped 17p to 124p on the news, valuing the business at £240m. Analysts said a price of between 150p-170p per share would be fair for the retailer which has a strong brand name but has seen falling sales and profits in recent years. Body Shop has issued two profits warnings in the last six months alone and has been suffering from management mistakes as well as increased competition from rivals such as Boots and the supermarkets.

In May, Body Shop reported halved profits of £12.8m after introducing too many new products and phasing out popular lines. The business has 1,841 stores in 49 countries. It has 315 shops in Britain.

Peter Jones, retail analyst at Peel Hunt, said a valuation of £350m would be justified. "A premium of 50 per cent seems fair enough for a company that hasn't really gone anywhere for a long time," he said.

Another analyst said a takeover could be good for Body Shop. "There is huge scope to improve the profits. It just needs a bit of time and management. I should think shareholders are pleased that someone is trying to take the business out."

Omnilife, based in Guadalajara, Mexico, was set up in 1991 and sells nutritional supplements direct to consumers. It was founded by Jorge Vergara Madrigal and has operations across Latin America. But the key to the Body Shop deal will be Ominilife's ability to raise the money to fund it.

Body Shop was started by Anita Roddick with a single store in Brighton. From the start its appeal was based on "environmentally friendly" products and a firm stance against the testing of cosmetics on animals. Ms Roddick was backed by Ian McGlinn, a former garage owner who lent Ms Roddick £4,000 to start the business. He still holds a 23 per cent stake worth £80m.

Body Shop caught the public imagination with exotic products such as peppermint foot lotion and banana shampoo. Ms Roddick became one of Britain's best known entrepreneurs and attracted so much publicity that Body Shop never needed to advertise.

The business floated on the stock market in 1984 and the business rapidly expanded across the world, often on a franchise basis.

But the relationship between the City and the idealistic Ms Roddick was never an easy one. She once described City bankers as "pin-striped dinosaurs of Throgmorton Street". A few years ago the Roddicks considered taking the group private but baulked at taking on the debt that would have been required.

In 1998, the Roddicks took a back seat in the management of the company and brought in Patrick Gournay from French food group Danone, as chief executive. He improved the structure of the business by buying in many of the group's franchises. In March, Body Shop dismissed reports of a possible bid from its smaller rival and former supplier, Lush.

Since stepping back to the position of joint chairman (with her husband), Ms Roddick has continued to indulge her passion in travelling to remote places looking for exotic new ingredients.

Earlier this year she said she had ambitions to "smash the World Trade Organisation, blow up the armaments industry and do some real populist campaigning".

She sparked controversy last year by branding anti-ageing creams as "pap" and urging people to go out and buy a bottle of Pinot Noir wine instead.