L'Oréal SA said Friday it has entered exclusive talks to sell The Body Shop to Natura Cosméticos SA, after reviewing the strategic options for what has been the French beauty-products company's worst-performing business in recent years.
Natura, Brazil's biggest cosmetics company, has made a firm offer that values The Body Shop at an enterprise value of EUR1 billion ($1.12 billion), L'Oréal said. The proposed deal is subject to regulatory approval in Brazil and in the U.S.
"It's a dream deal," Natura Chief Executive João Paulo Ferreira said in a conference call. "The proposed purchase of The Body Shop will be the decisive step in turning us into an international player in the cosmetics industry."
Founded in 1976 by British social and environmental campaigner Anita Roddick and her husband, Gordon, The Body Shop expanded to more than 60 countries and was acquired by L'Oréal in 2006. But it has struggled in recent years amid tough competition and muted growth in its home market of the U.K.
In 2016, The Body Shop posted a 4.8% decline in sales to EUR920.8 million. Operating profit fell 38% year-over-year to EUR33.8 million, or just 0.7% of L'Oreal's total.
L'Oréal began shopping for buyers for the brand earlier this year, and Natura jumped at the opportunity. "The fact already knew each other well probably facilitated the process," Mr. Ferreira said, noting that Natura and The Body Shop first had talks in 2001.
Natura plans to finance the deal with loans from a group of Brazilian and foreign banks, executives said, declining to identify which banks are involved in the transaction. It plans to make a one-time payment upon completion of the deal, which is expected to close in 2017.
"The ethical values and expertise of Natura make it the perfect new owner for The Body Shop to accelerate the rejuvenation of the brand and its future expansion," said Jeremy Schwartz, chairman and chief executive of The Body Shop.
Write to Nick Kostov at Nick.Kostov@wsj.com and Paul Kiernan at firstname.lastname@example.org
(END) Dow Jones Newswires
June 09, 2017 12:27 ET (16:27 GMT)