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CJ Group Said Considering Bid for The Body Shop

The South Korean diversified company has made a declaration to the country’s financial regulator, according to media reports.

PARIS – South Korea’s CJ Group is studying a possible bid for The Body Shop, according to media reports.

The diversified concern, based in Seoul, has declared to South Korea’s Financial Supervisory Service that it is currently examining a potential purchase of the L’Oréal-owned company, but that nothing has been decided, the reports say. CJ Group, whose other holdings range from food, pharmaceuticals and biotechnology to media and home shopping, said also that it would make another declaration to the financial regulator once a decision has been made.

A L’Oréal spokeswoman had no comment.

No one at CJ Group or South Korea’s financial regulator could immediately be reached.

L’Oréal has been considering options for The Body Shop, a beleaguered business that industry experts have said would make a good fit for a private equity player or an Asian company.

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In early February, when reports surfaced that the world’s largest beauty maker was working with Lazard bankers to review possibilities for The Body Shop, which it purchased 11 years ago, an outright sale of the activity for 1 billion euros, or $1.07 billion at current exchange, seemed among the most likely outcomes. Jean-Paul Agon, L’Oréal’s chairman and chief executive officer, subsequently confirmed that options were being considered for the business.

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“It has been decided to study all strategic options,” he said on Feb. 10, during a meeting with financial analysts and journalists in company headquarters in Clichy, outside of Paris.

When the reports initially percolated, Eva Quiroga, an analyst at Deutsche Bank, told WWD: “The Body Shop has been a drag on like-for-like growth – which has since the acquisition averaged 2.6 percent [gains] versus 4.4 percent for the rest of L’Oréal – and margins – 5.7 percent last year versus 17.8 percent for the [group].

“The key reasons for owning The Body Shop have largely not materialized over time: Its position as a natural brand, one of the fastest-growing segments of the market, never really appealed to the consumers. Its position as a masstige brand did ultimately fail, as L’Oréal has had to adjust prices downward, and its own store expertise was eventually trumped by the learning from the much more successful Kiehl’s business,” she continued.

“Strategically, the brand isn’t extendable into other beauty categories like makeup or skin care, as management thought it would be,” said Javier Escalante, a consultant.

“Financially, The Body Shop not only earns lower returns on capital and operating margins relative to the balance of L’Oréal’s portfolio, but it also has consistently underperformed operationally and financially key competitors such as Bath and Body Works,” he added.

In 2016, The Body Shop posted a 6.3 percent decline in reported sales, to 321.3 million euros, or $346.7 million at average exchange for the 12-month period.

Anita Roddick and her husband Gordon founded The Body Shop in 1976. In the early years, the brand was at the forefront of the naturals movement, offering products based on everyday and exotic ingredients; promoted environmental issues by encouraging recycling, and spearheaded beauty’s ethical drive, with high-impact campaigns against animal testing and endorsing fair trade — long before they became fashionable causes.

Roddick also championed a holistic approach to beauty and promoted a more inclusive take on what is considered appealing.

L’Oréal acquired The Body Shop in 2006 for 652 million pounds, which at the time was worth $1.14 billion, to bolster its activity in the natural skin-care market.