The world's largest cosmetic company, L'Oreal, will acquire The Body Shop - a move that will see it break into new ground as the brand-owner of a business revered for its ethical values.
L'Oreal says that it will pay a total of £652m ($1.145bn) in a deal that will secure a majority stake. The Body Shop shareholders were won over by what analysts described as a generous offer by the France-based giant.
The offer means that shares, currently valued at 223.5 pence on the London Stock Exchange, will be bought from shareholders for 300 pence, representing a 34.2 per cent premium.
"For the shareholders L'Oréal's offer is a significant premium to the share price and I believe provides an opportunity for them to realise fully now the prospects for the group on a stand alone basis," said Adrian Bellamy, chairman of The Body Shop.
"For the other stakeholders this combination of our two organisations - The Body Shop and L'Oréal - will provide significant strategic impetus to The Body Shop's growth plans for its three retail channels of stores, direct selling and e-commerce around the world," he added.
The Body Shop has been going through some difficult times in recent years, with its boom period during the 1990s proving a hard act to follow into the new millennium.
Last year some signs of progress were showing following a major image revamp, but lower than expected Christmas 2005 trading in the US and UK markets saw share prices to tumble 20 per cent back in January, leading to further speculation over a possible sale.
L'Oreal says that its primary objective is to increase The Body Shop's growth, while adding a complementary brand with a strong identity and values to its portfolio. In turn it says that The Body Shop will benefit from access to L'Oreal research and development facilities, as well as its marketing resources.
The intention is to develop The Body Shop as a standalone unit within the L'Oreal business portfolio, which means that The Body Shop retail units would continue to sell only its own-brand products.
"A partnership between our companies makes perfect sense," said Sir Lindsay Owen-Jones, L'Oreal CEO, "Combining L'Oreal's expertise and knowledge of international markets with The Body Shop's distinct culture and values will benefit both companies."
Although The Body Shop's £700m yearly turnover pales when compared to L'Oreal's £10bn turnover, the acquisition certainly appears to make good business sense.
After announcing L'Oreal's yearly results last month, Owen-Jones said that it was on the acquisition trail and that it would be actively looking for opportunities in new areas of the personal care business in order to maintain the consistent sales growth of the last ten years.
The Body Shop certainly represents a new departure for L'Oreal and it is an acquisition that is widely believed will bring a great deal of credence to the company's business portfolio because of its strong ethical stance and positive image in the public eye.
However, the effect that the acquisition will have on the Body Shop may be more questionable. Dame Anita Roddick, Body Shop founder and majority stake holder in the company, will undoubtedly be keen to assure that the positive image she has worked so hard to acheive during the course of the past 30 years will remain firmly in place.