The Body Shop owner Natura snaps up Avon in £1.6bn deal

The owner of The Body Shop, Natura, is snapping up direct-selling cosmetics firm Avon in a deal that values the UK company at £1.6bn.

Brazil-based Natura, which also has the Aesop brand in its stable, said the agreement would create the world's fourth-largest beauty company and boost its direct sales offer at a time when both are grappling competition from internet sales.

Natura is primarily a physical space retailer with 3,200 stores worldwide.

Under the terms of the share swap deal, Natura will hold 76% of the combined business.

Investors in 133-year-old Avon Products will get 0.3 Natura share for each Avon share - a premium of 28% on the value seen on Tuesday.

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Shares in both companies had ended over 9% higher on Wednesday as speculation mounted that a deal was imminent.

The takeover will give them a commanding market share of almost 47% in Brazil - their largest single market - where Natura has a 31% share currently, according to research group Euromonitor.

While such a dominant position could concern regulators, who must approve the deal, analysts said both currently offer each other's products so competition concerns were likely to be limited.

Natura said it expected the deal to be concluded by early next year - a consequence of the requirement for shareholders of both firms and competition authorities in several countries to approve the tie-up.

Jan Zijderveld, Avon's chief executive, said: "This combination is the start of an exciting new chapter in Avon's 130-year history.

"It stands as a testament to the progress of our efforts to 'Open Up Avon', and we believe it will allow us to significantly accelerate our strategy and further expand into the online channel.

"Over the past year, we have started a transformation to strengthen Avon's competitiveness by renewing our focus on Her, simplifying our operations, and modernising and digitising our brand.

"Together with Natura, we will have broader access to innovation and a portfolio of products, a stronger e-commerce
and digital platform, and improved data and tools for Representatives to drive growth and enhance value for shareholders."