LONDON — Is L’Oréal in an acquisitive mood right now?
News that the French beauty giant might be interested in buying The Body Shop sent the British beauty manufacturer and retailer’s share price soaring to a 14-year high of 2.80 pounds, or $4.90 at current exchange, during trading here Thursday. This followed The Body Shop’s share price spiking 10.5 percent Wednesday, following rumors of a management buyout.
L’Oréal indicated Thursday it has no firm plans to buy The Body Shop.
On the London Stock Exchange’s Web site, L’Oréal posted a statement that read, “L’Oréal’s management is continually evaluating a wide range of strategic alternatives that may add value to its shareholders, including a possible offer for The Body Shop. Any offer, if made, is likely to be solely in cash. However, no decision has been made regarding any offer, L’Oréal’s board has not been consulted and no approach has been made to The Body Shop.”
Reached on the phone, a Paris-based L’Oréal spokesman would not confirm or deny a possible future bid. He added, however, L’Oréal was obliged to issue a statement regarding The Body Shop, since London Stock Exchange rules stipulate that when a company’s share price rises by more than 5 percent in one day and reports are circulating about a possible acquisition bid, the rumored acquirer must issue a declaration on the subject.
For its part, The Body Shop late Thursday published a press release responding to L’Oréal’s statement. It said, “The board of The Body Shop notes the announcement today by L’Oréal that it is evaluating a possible offer for The Body Shop. The Body Shop has not received any proposal from L’Oréal. The Board remains confident about the future prospects for the group and its ability to deliver significant value for its shareholders.”
To many, a L’Oréal acquisition would come as little surprise, since the company last week unveiled its future growth strategy under incoming chief executive Jean-Paul Agon. During a meeting for financial analysts held in L’Oréal’s Paris headquarters, Agon underlined that organic growth is to remain key for the company, but that acquisitions will also play a role in future development.
As reported, he said, “L’Oréal has always been a growth business and will remain so. Our ambition is to return to a comparative growth target of 6 percent to 8 percent per year. Pursuing this growth will always be our number-one priority.”
Related Articles
You May Also Like
Many analysts believe The Body Shop would make a good new business for L’Oréal.
“I think it makes sense for L’Oréal to be looking at The Body Shop based on comments [L’Oréal] has made in the last few years about changes in distribution and shifts in personal care and about being closer to the customer,” said Sandy Beebee, a New York-based consumer analyst at HSBC. “It doesn’t have a brand like it in its portfolio, and it has tried to fill out areas of weakness in the past. An upper-mass natural cosmetics line would be a nice addition.”
“It would be great news,” agreed Manuelle de la Riviere, a Paris-based analyst at Fideuram Wargny, of a possible deal.
She noted that The Body Shop’s retail structure, comprising 2,050 wholly owned and franchised doors worldwide, would offer L’Oréal an alternative to prestige perfumeries, whose business has been in the doldrums. Indeed, L’Oréal has shown increasing interest in retail of late, having opened freestanding stores for its Lancôme and L’Oréal Paris brands.
Yet, de la Riviere doesn’t think that a L’Oréal acquisition of The Body Shop is imminent.
“L’Oréal has clearly said that no approach has been made to The Body Shop,” she said. “It looks at possible acquisitions all the time.”
L’Oréal snapped up Skinceuticals and Delial last year, and bowed out of bidding for Kanebo.
Other analysts, in the meantime, are skeptical about L’Oréal buying The Body Shop.
“Boots and Superdrug in the U.K. are big customers of L’Oréal’s; how happy are they going to be if L’Oréal buys The Body Shop?” said Steve Davies, a London-based retail analyst at Numis.
In any event, were a deal to go ahead, it would be key to get The Body Shop founders Anita and Gordon Roddick, who jointly retain 18 percent of the company, and Ian McGlinn, an early The Body Shop backer, who holds 22.6 percent, involved, said analyst Richard Ratner of London-based Seymour Pierce in a research note.
Other directors in The Body Shop own 3.6 percent.
If an acquisition were in the cards, Ratner would suggest a price of between 280 pence, or $3.33, and 300 pence, or $3.58, per The Body Shop share. “We would be very surprised if the levels being talked about didn’t appeal to them,” he added.
It is not the first time The Body Shop has been an acquisition target. Omnilife of Mexico was in preliminary talks to take over the manufacturer and retailer in 2001 before the deal fell through and wiped $60 million off The Body Shop’s value.
The Body Shop shares closed on the London Stock Exchange Thursday up 7.3 percent at 2.65 pounds, or $4.64, while L’Oréal’s closed on the Paris Bourse up 2.35 percent at 76.25 euros, or $90.87.