PARIS, France — French cosmetics and luxury goods group L'Oréal has started exclusive talks to sell its The Body Shop business to Brazilian make-up company Natura Cosmeticos in a possible €1 billion (£862 million) deal.
L'Oréal said earlier this year it was reviewing its strategy for The Body Shop, which it bought for £652 million in 2006, and that the sale of the business had attracted a wide range of bidders.
L'Oréal said on Friday it had received a firm offer from Natura Cosmeticos, and that the proposed deal put an enterprise value of €1 billion on the four decades old beauty brand, a pioneer in mass marketing of cosmetics made without animal testing and with natural ingredients.
L'Oréal shares were up 1.4 percent in early session trading, outperforming a 1 percent gain on France's benchmark CAC-40 index and a 0.4 percent rise on the STOXX Europe 600 Personal & Household Goods index.
Keren Finance fund manager Gregory Moore said the price tag had pleased L'Oréal investors, given earlier reports it could be sold for around €800 million.
"The stock has reacted well to the news, because there were some people who thought it could be sold for less," said Moore, whose firm owns L'Oréal shares in its portfolio.
Founded in 1976 by British entrepreneur Anita Roddick, the company pioneered ethical beauty but has since fallen victim to increased competition from newcomers also offering similar products based on natural ingredients with no animal-testing.
"Natura will support The Body Shop development in the long-term and enable The Body Shop to best serve its customers while respecting its strong commitments towards its employees, franchisees and stakeholders," said L'Oréal chairman and chief executive Jean-Paul Agon in a statement.
Natura chief executive Joao Paulo Ferreira said that for his part, The Body Shop would fit in well with Natura's similar businesses, such as its "Aesop" brand.
L'Oréal shares are up around 10 percent so far in 2017, broadly in line with a similar rise on the CAC-40, with the stock having touched a record high earlier this month.
By Sudip Kar-Gupta; Editor Matthias Blamont and Andrew Callus.