L'Oreal SA, the world's largest maker of cosmetics, said it may make an offer for Body Shop International Plc, the U.K. retailer of natural cosmetics started by Anita Roddick. Body Shop's shares gained as much as 13 percent.
L'Oreal is considering a ``wide range of strategic alternatives,'' including a cash offer for Body Shop, the French owner of Lancome said today in a Regulatory News Service statement. The company said it hasn't approached Body Shop, which is based in the English town of Littlehampton.
Cosmetics companies are increasingly moving into retailing as more consumers purchase cosmetics at specialty chains rather than department stores. LVMH Moet Hennessy Louis Vuitton SA has its own stable of Sephora stores to boost sales of products including Dior perfumes. Estee Lauder Cos., the maker of Clinique cosmetics, has MAC stores.
More customers are turning to Body Shop as the company positions itself nearer the luxury end of the cosmetics market to avoid direct competition with mass merchandisers such as Tesco Plc in the U.K and Wal-Mart Stores Inc. in the U.S.
Body Shop isn't ``the wacky, ethical business it once was and has been going upmarket in recent years, selling more expensive skincare, so an approach from cosmetics giant L'Oreal isn't that big a surprise,'' said Nick Bubb, an analyst at Evolution Securities in London.
Shares Jump
Shares of Body Shop gained as much as 33 pence to 280 pence and traded at 274 pence at 12:31 p.m. in London. The company has a market value of 586 million pounds ($1.03 billion). L'Oreal shares rose 55 cents, or 0.7 percent, to 75.05 euros in Paris.
Some analysts dismissed the possibility of a takeover: ``Instances of major manufacturers buying retail businesses are pretty rare,'' said Numis Securities analysts Steve Davies and Jose Marco in an e-mailed note. They recommend investors ``hold'' Body Shop shares. ``Shareholders should consider taking advantage of today's record highs to slice their holdings.''
L'Oreal's Jean-Paul Agon, who will become chief executive officer in April, on Feb. 16 said the company may make acquisitions to speed up the process of achieving market share in all of the regions in which it does business. L'Oreal made two acquisitions last year: Sara Lee Corp.'s Delial sun creams and closely-held SkinCeuticals, a Dallas-based skincare company.
Body Shop released a statement yesterday saying it knew ``no reason'' for the 11 percent increase in its share price on that day. The stock has advanced 21 percent in the past six months.
Roddick and her husband own about 18 percent of the company, according to Bloomberg data. Ian McGlinn, a former garage shop owner who lent Roddick 4,000 pounds to open a second store, owns about 23 percent of the stock, the data show.
