PARIS, Mar 17 (Reuters) L'Oreal is to buy Britain's The Body Shop, a specialist in ethically sourced products, for 652 million pounds ($1.14 billion) in cash, the world's largest cosmetics group said on Friday.
It said acquiring the maker of honey and oat scrub mask and grape seed cream would not have an impact on the French group's earnings in 2006 but would start contributing to them thereafter.
The bid lifted Body Shop shares 10.7 per cent to 296 pence by 0810 GMT (1340 IST) while L'Oreal stock was up 1.14 per cent at 75.50 euros.
L'Oreal said it planned to operate the British company as a separate business and founder Anita Roddick would retain her current role as consultant to Body Shop.
''They (l'Oreal) understand what a maverick The Body Shop was in the business world and how we helped change the language of business, incorporating the action of social change, especially in human rights, animal welfare, the environment and community trade,'' Roddick said in a statement.
L'Oreal said it had received irrevocable undertakings and had been granted a call option which together represented 42.6 per cent of Body Shop's capital.
Roddick, who together with her family owns about 19 per cent of Body Shop, founded the business from a small Brighton shop in 1976 selling toiletries made from natural raw ingredients sourced from the developing world in recycled packaging.
The company, which generated revenues of 419 million pounds in the year to Feb. 21, was a huge success in the 1980s but struggled to expand in the United States and suffered from mounting competition from rivals jumping on the bandwagon.
It is now back on its feet with more than 2,000 stores in 53 countries but issued a profit warning in January after weaker-than-expected sales.
The French group said its 300 pence-a-share offer represented a premium of 34.2 per cent to Body Shop's closing mid-market price of 223.5 pence a share on Feb. 21, the last day before speculation of a possible bid for Body Shop.
L'Oreal's offer is conditional on receiving regulatory clearance.
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