SECTOR DEALS OF THE WEEK: L’Oréal as a Seller?


Beauty care leader considers divesting The Body Shop

The world’s largest beauty care company is making headlines again; however, this time as a potential seller. During its earning call last week, L’Oréal announced it would explore strategic options regarding The Body Shop. The considered sale of The Body Shop is part of L’Oréal’s “brand portfolio optimization” strategy as described by its Chairman and CEO, Jean-Paul Agon. Since L’Oréal’s acquisition of The Body Shop in 2006 for $1.1 billion, the brand has under-performed the rest of L’Oréal—in terms of growth, operating margins and return on capital.

Founded as an early forerunner of the natural and eco-conscience movements in beauty and personal care, The Body Shop has struggled in recent years due to lack of differentiation in the market and increased competition in the sector. Industry sources report that private equity suitors have already expressed interest in acquiring the brand with a potential price tag north of $1 billion. 

L’Oréal has been extremely active over the past year. Last July the company purchased IT Cosmetics for $1.2 billion and last month it announced the purchase of the CeraVe, AcneFree and Ambi brands from Valeant Pharmaceuticals for $1.3 billion. However, 2017 could be the year we see L’Oréal put on the seller hat for the first time since the sale of its stake in Galderma to Nestlé in 2014.