Natura to sell The Body Shop to private equity firm for £207mn

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Brazilian cosmetics company Natura has agreed to sell The Body Shop to private equity firm Aurelius, after struggling to revive the UK retailer’s fortunes.

The deal gives the company an enterprise value of £207mn, Natura said in a statement, a fraction of the €1bn that Natura paid to acquire the business from L’Oréal in 2017.

For $3.9bn-valued Natura, the divestment represents another step in a retreat from its once global ambitions. The São Paulo-based group went on an international expansion drive in the previous decade, buying up The Body Shop and then door-to-door seller Avon Products for $2bn in 2019.

Founded in 1976 by the late Anita Roddick and her husband Gordon, The Body Shop was among the first companies to promote so-called ethical consumerism which argued that business could be a force for good.

The Body Shop now has about 2,500 shops across more than 70 countries and sells a range of skincare, body care and hair care products, among other things, which have not been tested on animals and are increasingly vegan.

Aurelius, which has offices across Europe, specialises in buying and turning around unloved businesses carved out of corporates or companies facing operational difficulties.

“The Body Shop is a business many of us grew up with,” Tristan Nagler, a partner at Aurelius, told the Financial Times in an interview. “There is an opportunity to put it on its own two feet and return it to its former glory.”

Aurelius is betting that it can improve the performance of a business that has struggled under Natura’s ownership and had to contend with other companies catching up with its once-unique ethical messaging.

After a couple of years of improved performance, The Body Shop’s financial figures once again disappointed investors and analysts in 2022.

The retailer’s declining sales continued in the third quarter, falling 13 per cent in constant currency terms to R$830mn. Core profits took a hit from restructuring costs, with earnings before interest, tax, depreciation and amortisation down two-fifths to R$62m.

Nagler said Aurelius sees an opportunity to build out The Body Shop’s online presence, an area where the beauty market has not been as quick as other industries to generate sales.

“It’s still quite bricks and mortar,” Nagler added, referring to the beauty market more broadly. “The whole industry is lagging a little bit and there is no great reason for that.”

Aurelius has sealed deals in consumer-facing retailers including buying sportswear retailer Footasylum from JD Sports last year.

“We are judging every situation on its merits and try to be open-minded,” Nagler said. Despite rising competition, he said, “the beauty market is incredibly attractive and growing strongly”.

Natura’s ownership of The Body Shop and Avon turned it into the world’s fourth-largest pure-play beauty company. But the cosmetic conglomerate’s attempts to revive the fading marques faltered.

A chief executive appointed last year, former banker Fabio Barbosa, has embarked on a corporate turnaround effort, selling off business units as management looks to tackle its debt levels.

Natura said under its ownership The Body Shop had “undergone an overhaul of its product portfolio and a rejuvenation of the brand”.

“We are pleased to have found a strong home for The Body Shop to write the next chapter in its remarkable story,” added Barbosa.

Natura offloaded luxury Australian beauty outfit Aesop to industry rival L’Oréal earlier this year on an enterprise value of $2.5bn.

It is now focusing on integrating its eponymous brand, famed for sourcing sustainable ingredients for soaps and shampoos from the Amazon rainforest, with the Latin American operations of Avon.

While Natura’s share price has rallied about 30 per cent so far this year, the shares are down sharply from a peak in July 2021.