Natura Cosmeticos SA entered exclusive talks to acquire British make-up seller Body Shop from L’Oreal SA, with an offer that values the U.K. chain at 1 billion euros (US$1.1 billion).
An acquisition by Natura would represent a major expansion for the Brazilian cosmetics company, which originated as a direct-sales business like Mary Kay or Avon and expanded its retail operation with the US$70 million purchase of Australia’s Aesop in 2013. The deal would give Natura new sales channels and more exposure to developed markets, though Body Shop is in “great need of a turnaround” and will require a lot of work, said Giovana Scottini, an analyst at Eleven Financial Research.
“If everything works well, Natura will become a global cosmetics player, which is a whole different animal,” Scottini said. “This might require massive investments in marketing, which is another concern.”
Natura shares dropped 4.3 per cent to 31.06 reais in Sao Paulo, giving the company a market value of about US$4.1 billion. L’Oreal shares rose less than 1 per cent to 190.05 euros at the close in Paris.
A Brazil-U.K. transaction is unusual given the political turmoil in both countries, which has wreaked havoc on markets. Thursday’s U.K. election left the ruling Conservative Party short of an overall majority, causing the pound to fall 1.8 per cent. Brazilian President Michel Temer, who has thrilled investors by championing economic reforms, was implicated last month in a bribery scandal, sending the real reeling.