17 Mar 2006 07:03
L'Oreal S.A17 March 2006 FOR IMMEDIATE RELEASE 17 March 2006 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO ORFROM THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTIONWHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCHJURISDICTION Recommended cash offer by JPMorgan Cazenove on behalf of L'Oreal S.A. for The Body Shop International PLC Summary The boards of L'Oreal and The Body Shop are pleased to announce that they havereached agreement on the terms of a recommended cash offer to be made byJPMorgan Cazenove, on behalf of L'Oreal, to acquire the entire issued and to beissued share capital of The Body Shop. The Offer will be at 300 pence in cashfor each The Body Shop Share, which values The Body Shop's existing issued sharecapital at approximately £652.3 million. Highlights • The terms of the Offer represent a premium of approximately: - 34.2% to The Body Shop's closing mid market price of 223.5 pence on 21February 2006 (being the last day prior to press speculation of a possible bidfor The Body Shop); - 21.5% to The Body Shop's closing mid market price of 247.0 pence on 22February 2006 (being the last business day prior to the date of L'Oreal'sannouncement of a possible offer for The Body Shop); and - 31.5% to The Body Shop's average closing mid market price of 228.2pence for the 6 months up to and including 21 February 2006. • The Body Shop Shareholders on the register at 16 March 2006 will beentitled to receive a second interim dividend, of 4.4 pence per The Body ShopShare, payable after the Offer becomes or is declared wholly unconditional, inlieu of a final The Body Shop dividend for the 52 weeks to 25 February 2006. • The acquisition of The Body Shop would enhance L'Oreal's existing,strong and diversified brand portfolio. L'Oreal believes that the acquisitionof The Body Shop would: - provide L'Oreal with a sizeable and complementary brand with revenue of £419million in the 52 weeks to 26 February 2005 and a presence in 54 countries; - give L'Oreal access to a successful, naturally-orientated, cosmetics brandwith a clear and unique position in the "Masstige" sector; and - provide L'Oreal with access to a dedicated, global, multi-channel,distribution network through retail outlets, The Body Shop At Home ande-commerce. • The Body Shop would retain its existing identity and values and wouldcontinue to be based in the United Kingdom. The Body Shop would operateindependently within the L'Oreal Group and would be led by The Body Shop'scurrent management team reporting directly to the CEO-Designate of L'Oreal,Jean-Paul Agon. • L'Oreal expects that the acquisition of The Body Shop would be EPSneutral in the financial year to 31 December 2006, and EPS accretive thereafter*. • A Loan Note Alternative will also be made available to all The BodyShop Shareholders (other than any The Body Shop Shareholders in any RestrictedJurisdiction). • The directors of The Body Shop, who have been so advised by MerrillLynch, consider the terms of the Offer to be fair and reasonable. In providingits advice, Merrill Lynch has taken into account the commercial assessments ofthe directors of The Body Shop. Accordingly, the directors of The Body Shopintend unanimously to recommend that The Body Shop Shareholders accept theOffer, as the directors of The Body Shop have irrevocably undertaken to do inrespect of their own beneficial shareholdings. • The Offer is conditional, amongst other things, upon receiving therequired regulatory clearances. Further information on the terms and conditionsto which the Offer will be subject are set out in Appendix 1 and will be set outin the Offer Document, which L'Oreal expects to despatch to The Body ShopShareholders as soon as practicable. Irrevocable undertakings and call option L'Oreal has received irrevocable undertakings to accept the Offer from DameAnita Roddick and Mr Gordon Roddick, in respect of 39,171,672 The Body ShopShares in aggregate, representing approximately 18.0 per cent. of The BodyShop's existing issued share capital. All of the other directors of The BodyShop have given irrevocable undertakings to accept the Offer in respect of7,806,046 The Body Shop Shares in aggregate representing approximately 3.6 percent. of The Body Shop's existing issued share capital. All of theseundertakings will remain binding in the event of a higher competing offer. In addition to the irrevocable undertakings described above, BeaverbridgeHoldings Limited has granted L'Oreal a call option which gives L'Oreal theability to require Beaverbridge Holdings Limited to tender 45,666,768 The BodyShop Shares, in aggregate, representing approximately 21.0 per cent. of The BodyShop's existing issued share capital (being The Body Shop Shares in which Mr IanMcGlinn is interested) to the Offer. The call option will remain binding in theevent of a higher competing offer. In aggregate, the irrevocable undertakings and the call option described aboveaccount for approximately 42.6 per cent. of The Body Shop's total existingissued share capital. Further details of these irrevocable undertakings and the call option are setout in Appendix 3 to this announcement. The Chairman and CEO of L'Oreal, Sir Lindsay Owen-Jones, said: "We have always had great respect for The Body Shop's success and for its strongidentity and values created by its outstanding founder, Dame Anita Roddick. Apartnership between our companies makes perfect sense. Combining L'Oreal'sexpertise and knowledge of international markets with The Body Shop's distinctculture and values will benefit both companies. We are delighted that The BodyShop's board has agreed to unanimously recommend our offer to the Company'sshareholders. We look forward to working together with The Body Shop'smanagement, employees and franchisees to fulfil The Body Shop's independentpotential as part of the L'Oreal family." Commenting on the Offer, Mr Adrian Bellamy, Chairman of The Body Shop, said: "For the shareholders, L'Oreal's offer is a significant premium to the shareprice and I believe provides an opportunity for them to now realise fully theprospects for the group on a stand alone basis. For the other stakeholders this combination of our two great organisations - TheBody Shop and L'Oreal - will provide significant strategic impetus to The BodyShop's growth plans for its three retail channels of stores, direct selling ande-commerce around the world. In just 30 years The Body Shop has grown into asubstantial global branded retailer operating in 54 countries with greatopportunities ahead. Furthermore, L'Oreal's significant strengths in themanagement and development of global brands, combined with our skills as aglobal retailer with strong values and commitments, will be a powerfulcombination in the cosmetics and personal care market place with correspondingopportunities for our employees, franchisees and The Body Shop consultants." Commenting on the Offer, Dame Anita Roddick, founder and non-executive directorof The Body Shop, said: "For both Gordon and I, this is without doubt the best 30th anniversary gift TheBody Shop could have received. L'Oreal has displayed visionary leadership in wanting to be an authenticadvocate and supporter of our values. They understand what a maverick The BodyShop was in the business world and how we helped change the language ofbusiness, incorporating the action of social change, especially in human rights,animal welfare, the environment and community trade. I am so proud of theseachievements. I want to thank all those employees, consultants, franchisees,suppliers and NGO friends who helped shape our identity. I am confident thatthey will see being part of the L'Oreal family as a great opportunity for TheBody Shop." JPMorgan Cazenove is acting as financial adviser to L'Oreal. Merrill Lynch isacting as financial adviser and corporate broker to The Body Shop. This summary should be read in conjunction with, and is subject to, the fulltext of the following announcement. Appendix 2 of this announcement contains thesources and bases of certain information used in this summary and in thefollowing announcement. Appendix 4 of this announcement contains definitions ofcertain terms used in this summary and the following announcement. There will be a financial information meeting for analysts and media atL'Oreal's headquarters, 41 Rue Martre, Clichy at 4:30 p.m. Paris time today (17March 2006). Enquiries: L'Oreal General +33 1 47 56 70 00 Analysts and institutional investors of L'Oreal Mrs Caroline Millot +33 1 47 56 86 82 Individual Shareholders of L'Oreal and market authoritiesMr. Jean-Regis Carof +33 1 47 56 83 02 JournalistsMr. Mike Rumsby +33 1 47 56 76 71 JPMorgan Cazenove +44 207 588 2828 Mark BreuerBarry Weir The Body Shop For all investor relations and media queries contact: Brunswick +44 207 404 5959 Louise CharltonWilliam CullumDeborah SpencerDominic McMullan Merrill Lynch +44 207 628 1000 Kevin SmithJamie HeathMark Astaire (Corporate Broking)Peter Tracey (Corporate Broking) This announcement does not constitute an offer to sell or an invitation topurchase any securities or the solicitation of an offer to buy any securities,pursuant to the Offer or otherwise. The Body Shop Shareholders are advised toread carefully the formal documentation in relation to the Offer once it hasbeen despatched. This will contain the full terms and conditions of the Offer,including details of how the Offer may be accepted. JPMorgan Cazenove, which is authorised by the Financial Services Authority, isacting exclusively for L'Oreal and no one else in connection with the Offer andwill not be responsible to anyone other than L'Oreal for providing theprotections afforded to clients of JPMorgan Cazenove or for providing advice inrelation to the Offer or any other matters referred to in this announcement. Merrill Lynch is acting exclusively for The Body Shop in connection with theOffer and no one else and will not be responsible to anyone other than The BodyShop for providing the protections afforded to clients of Merrill Lynch or forproviding advice in relation to the Offer or any other matters referred to inthis announcement. The availability of the Offer to The Body Shop Shareholders who are not residentin and citizens of the United Kingdom may be affected by the laws of therelevant jurisdictions in which they are located or of which they are citizens.Such persons should inform themselves of, and observe, any applicable legal orregulatory requirements of their jurisdictions. Further details in relation tooverseas shareholders will be contained in the Offer Document. Unless otherwise determined by L'Oreal, and permitted by applicable law andregulation, the Offer, including the Loan Note Alternative, will not be made,directly or indirectly, in, into or from, and will not be capable of acceptancein or from the United States, Canada, Australia or Japan or any jurisdictionwhere to do so would constitute a breach of securities laws in thatjurisdiction. Accordingly, copies of this announcement are not being, and mustnot be, mailed or otherwise forwarded, distributed or sent in, into or from theUnited States, Canada, Australia or Japan or any jurisdiction where to do sowould constitute a breach of securities laws in that jurisdiction. Personsreceiving this announcement (including custodians, nominees and trustees) shouldobserve these restrictions and should not send or distribute this announcementin, into or from any such jurisdictions. The Loan Notes to be issued in connection with the Offer have not been, nor willthey be, registered under the US Securities Act or under the securities laws ofany state or other jurisdiction of the United States (or under the securitieslaws of any other jurisdiction, the residents of which L'Oreal is advised totreat as Restricted Overseas Persons); the relevant clearances have not been,and will not be, obtained from the securities commission of any province,territory or jurisdiction of Canada; and no prospectus has been lodged with, orregistered by, the Australian Securities and Investments Commission or theJapanese Ministry of Finance. Accordingly, unless an exemption under such act orsecurities laws is available or unless otherwise determined by L'Oreal, andpermitted by applicable law and regulation, the Loan Notes may not be offered,sold, resold, delivered or transferred, directly or indirectly, in or into theUnited States, Canada, Australia or Japan or any other jurisdiction if to do sowould constitute a violation of the relevant laws of, or require registrationthereof in, such jurisdiction or to, or for the account or benefit of, a personlocated in the United States, Canada, Australia or Japan. Forward Looking Statements This announcement includes certain "forward-looking statements". Thesestatements are based on the current expectations of the management of The BodyShop and L'Oreal and are naturally subject to uncertainty and changes incircumstances. The forward-looking statements contained herein includestatements about the expected effects on L'Oreal of the Offer, the expectedtiming and scope of the Offer, anticipated earnings enhancements, estimated costsavings and other synergies, costs to be incurred in achieving synergies, otherstrategic options and all other statements in this announcement other thanhistorical facts. Forward-looking statements include, without limitation,statements typically containing words such as "intends", "expects","anticipates", "targets", "estimates" and words of similar import. By theirnature, forward-looking statements involve risk and uncertainty because theyrelate to events and depend on circumstances that will occur in the future.There are a number of factors that could cause actual results and developmentsto differ materially from those expressed or implied by such forward-lookingstatements. These factors include, but are not limited to, the satisfaction ofthe conditions to the Offer, and L'Oreal's ability to successfully integrate theoperations and employees of The Body Shop, as well as additional factors, suchas changes in economic conditions, changes in the level of capital investment,success of business and operating initiatives and restructuring objectives,customers' strategies and stability, changes in the regulatory environment,fluctuations in interest and exchange rates, the outcome of litigation,government actions and natural phenomena such as floods, earthquakes andhurricanes. Other unknown or unpredictable factors could cause actual results todiffer materially from those in the forward-looking statements. Neither The BodyShop nor L'Oreal undertake any obligation to update publicly or reviseforward-looking statements, whether as a result of new information, futureevents or otherwise, except to the extent legally required. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of "relevant securities" of The Body Shop, all "dealings" in any "relevantsecurities" of The Body Shop (including by means of an option in respect of, ora derivative referenced to, any such "relevant securities") must be publiclydisclosed by no later than 3.30 p.m. (London time) on the London business dayfollowing the date of the relevant transaction. This requirement will continueuntil the date on which the Offer becomes, or is declared, unconditional as toacceptances, lapses or is otherwise withdrawn or on which the "offer period"otherwise ends. If two or more persons act together pursuant to an agreement orunderstanding, whether formal or informal, to acquire an "interest" in "relevantsecurities" of The Body Shop, they will be deemed to be a single person for thepurpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of The Body Shop by L'Oreal or The Body Shop, or by any of theirrespective "associates", must be disclosed by no later than 12.00 noon (Londontime) on the London business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to the application of Rule 8to you, please contact an independent financial adviser authorised under theFinancial Services and Markets Act 2000, consult the Panel's website atwww.thetakeoverpanel.org.uk or contact the Panel on telephone number +44 (0) 207382 9026; fax +44 (0) 20 7638 1554. Not for release, publication or distribution, in whole or in part, in, into orfrom the United States, Canada, Australia or Japan. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO ORFROM THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTIONWHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCHJURISDICTION 17 March 2006 Recommended cash offer by JPMorgan Cazenove on behalf of L'Oreal S.A. for The Body Shop International PLC 1. Introduction The boards of L'Oreal and The Body Shop are pleased to announce that they havereached agreement on the terms of a recommended cash offer to be made byJPMorgan Cazenove, on behalf of L'Oreal, to acquire the entire issued and to beissued share capital of The Body Shop. The terms of the Offer value the existingissued share capital of The Body Shop at approximately £652.3 million. JPMorgan Cazenove is acting as financial adviser to L'Oreal. Merrill Lynch isacting as financial adviser and corporate broker to The Body Shop. 2. Summary of the Offer Under the Offer, which will be subject to the conditions and further terms setout below and in Appendix 1 and the full terms and conditions which will be setout in the Offer Document, The Body Shop Shareholders will be entitled toreceive: for each The Body Shop Share, 300 pence in cash The terms of the Offer value the entire existing issued share capital of TheBody Shop at approximately £652.3 million. The terms of the Offer represent a premium of approximately: - 34.2% to The Body Shop's closing mid market price of 223.5 pence on 21February 2006 (being the last day prior to press speculation of a possible bidfor The Body Shop); - 21.5% to The Body Shop's closing mid market price of 247.0 pence on 22February 2006 (being the last business day prior to the date of L'Oreal'sannouncement of a possible offer for The Body Shop); and - 31.5% to The Body Shop's average closing mid market price of 228.2pence for the 6 months up to and including 21 February 2006. The Body Shop Shares that are subject to the Offer will be acquired fully paidwith full title guarantee and free from all liens, charges, equitable interests,encumbrances, rights of pre-emption and any other third party rights andinterests of any nature whatsoever and together with all rights now andhereafter attaching thereto, including, without limitation, voting rights andthe right to receive and retain in full all dividends (other than the secondinterim dividend in lieu of a final The Body Shop dividend for the 52 weeks to25 February 2006) and other distributions (if any) declared, made or paid on orafter the date of this announcement. A Loan Note Alternative will be made available to all The Body Shop Shareholders(other than any The Body Shop Shareholders in any Restricted Jurisdiction),further details of which are set out in paragraph 5 below. The Body Shop Shareholders on the register at 16 March 2006 will be entitled toreceive a second interim dividend, of 4.4 pence per The Body Shop Share, payableafter the Offer becomes or is declared wholly unconditional, in lieu of a finalThe Body Shop dividend for the 52 weeks to 25 February 2006. 3. Recommendation The directors of The Body Shop, who have been so advised by Merrill Lynch,consider the terms of the Offer to be fair and reasonable. In providing itsadvice, Merrill Lynch has taken into account the commercial assessments of thedirectors of The Body Shop. Accordingly, the directors of The Body Shop intendunanimously to recommend that The Body Shop Shareholders accept the Offer, asthe directors of The Body Shop have irrevocably undertaken to do in respect oftheir own beneficial shareholdings. 4. Irrevocable undertakings and call option L'Oreal has received irrevocable undertakings to accept the Offer from DameAnita Roddick and Mr Gordon Roddick, in respect of 39,171,672 The Body ShopShares, in aggregate, representing approximately 18.0 per cent. of The BodyShop's existing issued share capital. All of the other directors of The BodyShop have given irrevocable undertakings to accept the Offer in respect of7,806,046 The Body Shop Shares in aggregate, representing approximately 3.6 percent. of The Body Shop's existing issued share capital. All of theseundertakings will remain binding in the event of a higher competing offer. In addition to the irrevocable undertakings described above, BeaverbridgeHoldings Limited has granted L'Oreal a call option which gives L'Oreal theability to require Beaverbridge Holdings Limited to tender 45,666,768 The BodyShop Shares, in aggregate, representing approximately 21.0 per cent. of The BodyShop's existing issued share capital (being The Body Shop Shares in which Mr IanMcGlinn is interested) to the Offer. The call option will remain binding in theevent of a higher competing offer. In aggregate, the irrevocable undertakings and the call option described aboveaccount for approximately 42.6 per cent. of The Body Shop's total existingissued share capital. Further details of these irrevocable undertakings and the call option are setout in Appendix 3 to this announcement. 5. The Loan Note Alternative As an alternative to all or some of the cash consideration of 300 pence per TheBody Shop Share, The Body Shop Shareholders (other than any The Body ShopShareholders in any Restricted Jurisdiction) who validly accept the Offer willbe able to elect to receive Loan Notes issued by L'Oreal on the following basis: For each £1 of cash consideration £1 nominal value of Loan Notes The Loan Note Alternative will be conditional upon the Offer becoming or beingdeclared unconditional in all respects. The Loan Note Alternative will remainopen for acceptance until the Offer closes. The Loan Notes will be issued by L'Oreal, credited as fully paid, in amounts andintegral multiples of £1 and the balance of any entitlement that is not a wholemultiple of £1 will be disregarded and not issued. The Loan Notes will bearinterest at 0.50 per cent. below six-month sterling LIBOR to be determined onthe first business day of each interest period. Interest will be payable byhalf-yearly instalments in arrears (less any tax) on 30 June and 31 December ineach year. The first payment of interest will be made on the first 30 June or31 December date which falls more than six months after the date of issue of theLoan Notes (the "First Payment Date"). On the First Payment Date, interest will be paid in respect of the period from(and including) the date of issue of the relevant Loan Notes to (but excluding)the First Payment Date. The Loan Notes will be redeemable in whole or in partfor cash at par at the option of noteholders on the first 30 June or 31 Decemberdate which falls more than six months after the date of issue of the Loan Notesand subsequently on each interest payment date. Unless L'Oreal decides otherwise, no Loan Notes will be issued by L'Orealunless, on or before the date on which the Offer becomes or is declaredunconditional in all respects, the aggregate nominal value of all Loan Notes tobe issued as a result of valid elections for the Loan Note Alternative exceeds£1 million. If such aggregate is less than £1 million, any such election shall,unless L'Oreal decides otherwise, be void and, provided the acceptance of theOffer is otherwise valid, the relevant The Body Shop Shareholders will be deemedto have accepted the Offer for cash. L'Oreal will have the right to redeem allof the Loan Notes if the aggregate nominal value of outstanding Loan Notes fallsbelow £1 million at any time during their term. If not previously redeemed, thefinal redemption date will be 30 June 2013. Any Loan Notes outstanding on thefinal redemption date will be redeemed at par (together with any accruedinterest) on that date. The Loan Notes will not be transferable, and noapplication will be made for them to be listed on, or dealt on, any stockexchange or other trading facility. The Loan Notes and the Loan Note Instrument will be governed by and construed inaccordance with English law and will be unsecured obligations of L'Oreal. Further details of the Loan Notes and the Loan Note Alternative will becontained in the formal Offer Document. 6. Information relating to L'Oreal L'Oreal is one of the world's leading manufacturers of cosmetics, on which ithas been focused since it was founded nearly a century ago. L'Oreal's strategicvision is grounded in its respect for the different sensitivities and culturalpreferences of its consumers over the world. For this reason, L'Oreal does notseek to export nor impose one single vision of beauty throughout the world. L'Oreal has 4 divisions with a unique and diverse portfolio of 18 distinct andcomplementary global brands of diverse cultural origins with strongpersonalities, developed for each distribution channel and which enjoy worldwiderecognition: - The Professional Products Division is dedicated to the hairdressingcommunity. Its products aim to meet the requirements of salon professionals inhair colourants, texture and haircare, and are used and sold in salonsworldwide. - The Consumer Products Division markets a portfolio of complementary brandsthrough mass-market retail channels. Its products combine high technology andstrong added-value with affordable pricing. - The Luxury Products Division has a portfolio of prestigious brands whoseproducts are sold in selective retail outlets such as department stores,perfumeries, travel retail outlets and the group's own boutiques. TheDivision's brands provide exclusive products featuring innovations developed byL'Oreal research. - The Active Cosmetics Division markets dermo-cosmetic skincare products soldin pharmacies and specialist sections of drugstores. L'Oreal's products are distributed through a range of channels includingmass-market channels, perfumeries, department stores and duty-free shops, hairsalons, pharmacies and specialty health and beauty outlets. L'Oreal alsodistributes mail-order cosmetics through The Club des Createurs de Beaute, ajointly held subsidiary of L'Oreal. The L'Oreal Group is now present in over130 countries and has approximately 52,000 employees, whose diversity ofnationalities' beliefs and preferences is considered an asset of L'Oreal. In the year ended 31 December 2005, the L'Oreal Group generated net sales (on anIFRS basis) of approximately €14.5 billion. The L'Oreal Group currently has amarket capitalisation of approximately €49.1 billion (based on a closing shareprice of €74.6 for each L'Oreal share on 16 March 2006, being the last businessday prior to the date of this announcement). 7. Information relating to The Body Shop The Body Shop markets a wide range of The Body Shop-branded cosmetics, includingbath and body products, skin-care products, make-up, fragrances, hair-care andmen's grooming products. The Body Shop was founded by Dame Anita Roddick and MrGordon Roddick in Brighton, United Kingdom in 1976. The company isheadquartered in Littlehampton, United Kingdom and as at 26 February 2005 hadapproximately 7,000 company employees within a total of approximately 30,000people including The Body Shop consultants and franchisee employees who reliedon The Body Shop for employment. The Body Shop operates a multi-channel distribution network distributing its ownThe Body Shop-branded products through company owned retail stores, franchisedstores and through its direct selling division 'The Body Shop at Home' ande-commerce. The manufacture of The Body Shop's products is mainly outsourced,with 28 suppliers in 22 countries as at 26 February 2005. The Body Shop is present in 54 countries worldwide, with particular strength inthe UK and Americas, and robust growth prospects in Asia-Pacific and ContinentalEurope, the Middle East, and Africa. As of 27 August 2005, The Body Shop had304 stores in the UK and Ireland, of which 235 were owned and 69 franchised, 433stores in the Americas of which 360 were owned and 73 franchised, 583 in AsiaPacific of which 66 were owned and 517 franchised, and 765 stores in ContinentalEurope, the Middle East, and Africa of which 117 were owned and 648 franchised. In the 52 weeks to 26 February 2005, (on a restated IFRS basis) The Body Shopgenerated earnings before interest and tax of £39.2 million with revenue of£419.0 million. 8. Background to and reasons for the Offer L'Oreal believes that the Offer would create significant value for itsshareholders and is consistent with L'Oreal's strategy of acquiring marketleading brands with global reach, with further potential to grow. Brand The Body Shop is a successful, global, naturally-oriented, cosmetics brand witha clear and differentiated identity. The brand is underpinned by strong andwell defined values with a distinct heritage. The Body Shop's brand positioningwould be highly complementary to L'Oreal's portfolio and would provide L'Orealwith a sizeable brand in the cosmetics sector which generated more than £700million in retail sales (approximately £419 million in revenue) in the 52 weeksto 26 February 2005 (on a restated IFRS basis). The Body Shop would constituteL'Oreal's only owned brand of British origin occupying the leading position inthe high-growth environmentally conscious consumer segment. The Body Shop brandwould represent an appealing addition to L'Oreal's existing range of brands. The Body Shop would operate independently within the L'Oreal Group and would beled by The Body Shop's current management team reporting directly to theCEO-Designate of L'Oreal, Jean-Paul Agon. The Body Shop would continue to bebased in the United Kingdom. Expertise in distribution The Body Shop markets its products through an extensive company-owned andfranchised store network (which comprised 2,085 stores worldwide as at 27 August2005) with an e-commerce channel and a direct selling operation, therebyexercising total control over the distribution of its products. L'Oreal wouldintend to develop The Body Shop brand and its retail network as a separateentity, exclusively selling The Body Shop branded products, while L'Oreal'sexisting products would continue to be marketed through its traditionaldistribution channels. L'Oreal believes that its contribution to The Body Shop would consist primarilyof the provision of access to L'Oreal's research and development capabilitiesand allowing The Body Shop to leverage L'Oreal's extensive marketing expertisein the cosmetics sector to further develop The Body Shop brand identity.L'Oreal would also continue to roll-out the new The Body Shop store format andaccelerate store openings in existing and new markets as part of The Body Shop'sexisting £100 million growth programme. L'Oreal expects that the acquisition of The Body Shop would be EPS neutral inthe financial year to 31 December 2006, and EPS accretive thereafter*. 9. Background to and reasons for recommending the Offer Since its founding in 1976, The Body Shop has become a leading global cosmeticsbrand by pioneering the development of the market for naturally inspiredpersonal care products. By espousing its founders' values of respect for theenvironment, animals and humanity, The Body Shop has developed a loyal customerbase, which has continued to grow as the need for ethical products has increasedamongst consumers. Following The Body Shop's rapid international expansion and success in the 1980sand 1990s, The Body Shop experienced disappointing profitability as The BodyShop Group struggled to cope with its growth. As a result of the substantialreorganisation that has taken place over the last four years under the currentexecutive management team, operating profit and earnings per share have improvedsubstantially, resulting in a strong share price performance. In 2004, a £100million investment plan was put in place to grow The Body Shop brand in existingand new markets and improve systems. This strategy was underpinned by a visionof creating an integrated multi-channel retailer offering customers a choice ofchannels to access The Body Shop products including retail, The Body Shop AtHome and e-commerce. Over the last two years, this strategy has delivered positive sales growth witha particularly strong performance in The Body Shop At Home. In the most recenttrading update in January 2006, sales performance in Asia and Europe, MiddleEast and Africa was good, but the Americas and the United Kingdom & Republic ofIreland underperformed group expectations. At the time, the board of The BodyShop made clear that it was confident in the strategy and the medium term growthprospects for The Body Shop. Against this background, the board of The Body Shop believe that the offer byL'Oreal not only fully reflects the prospects for The Body Shop Group on a standalone basis but also provides an opportunity for the furtherance of The BodyShop Group's employees and its social values within a world-class cosmeticscompany. 10. Management and employees of The Body Shop L'Oreal recognises the strong contribution made by The Body Shop's managementand employees to the development of The Body Shop and views them as beingcritical to the future success of The Body Shop, within the L'Oreal Group. TheBody Shop will add an important additional brand to the L'Oreal portfolio andL'Oreal expects that The Body Shop's managers and employees will play animportant role in the L'Oreal Group as well as benefiting from greateropportunities within it. Accordingly, L'Oreal has given the board of The BodyShop assurances that, following the closing of the Offer, the existingemployment rights, including pension rights, of all management and employees ofThe Body Shop will be fully safeguarded. L'Oreal expects that the executive directors of The Body Shop (Adrian Bellamyand Peter Saunders), along with the rest of The Body Shop's senior managementteam, will remain with The Body Shop. Dame Anita Roddick has also agreed toenter into a consultancy agreement with L'Oreal pursuant to which she willprovide consultancy services to the L'Oreal Group in addition to her currentrole as consultant to The Body Shop. 11. The Body Shop Share Schemes The Offer will extend to any The Body Shop Shares unconditionally allotted orissued pursuant to the exercise of options under The Body Shop Share OptionsSchemes while the Offer remains open for acceptance (or such earlier date asL'Oreal may, subject to the rules of the Code, decide). Appropriate proposalswill be made to participants in The Body Shop Share Options Schemes in duecourse. 12. Financing In addition to L'Oreal's existing financial resources, L'Oreal has obtainedcommitted financing, arranged by J.P.Morgan Chase Bank N.A. Paris Branch,sufficient to enable L'Oreal to satisfy in full the cash consideration payableto The Body Shop Shareholders and otherwise to fulfil its commitments under theterms of the Offer. 13. Disclosure of interests in The Body Shop Shares Save as set out in this announcement, as at 16 March 2006, the last practicabledate prior to this announcement, neither L'Oreal nor, so far as L'Oreal isaware, any person acting in concert with L'Oreal had an interest in or right tosubscribe for relevant securities of The Body Shop or had any short position inrelation to the relevant securities of The Body Shop (whether conditional orabsolute and whether in the money or otherwise), including any short positionunder a derivative, any agreement to sell or any delivery obligation or right torequire another person to purchase or take delivery of any relevant securitiesof The Body Shop. 14. Dealing disclosure requirements Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of The Body Shop, all "dealings" in any "relevantsecurities" of The Body Shop (including by means of an option in respect of, ora derivative referenced to, any such "relevant securities") must be publiclydisclosed by no later than 3.30 p.m. (London time) on the London business dayfollowing the date of the relevant transaction. This requirement will continueuntil the date on which the Offer becomes, or is declared, unconditional as toacceptances, lapses or is otherwise withdrawn or on which the "offer period"otherwise ends. If two or more persons act together pursuant to an agreement orunderstanding, whether formal or informal, to acquire an "interest" in "relevantsecurities" of The Body Shop, they will be deemed to be a single person for thepurpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of The Body Shop by L'Oreal or The Body Shop, or by any of theirrespective "associates", must be disclosed by no later than 12.00 noon (Londontime) on the London business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to the application of Rule 8to you, please contact an independent financial adviser authorised under theFinancial Services and Markets Act 2000, consult the Panel's website atwww.thetakeoverpanel.org.uk or contact the Panel on telephone number +44 (0) 207382 9026; fax +44 (0) 20 7638 1554. 15. Delisting, compulsory acquisition and re-registration If the Offer becomes or is declared unconditional in all respects, andsufficient acceptances under the Offer are received, L'Oreal intends to procurethat The Body Shop make applications to cancel the listing of The Body ShopShares from the UKLA's Official List and to cancel admission to trading in TheBody Shop Shares on the London Stock Exchange's market for listed securities. If L'Oreal receives acceptances under the Offer in respect of, or otherwiseacquires, 90 per cent. or more of The Body Shop Shares to which the Offerrelates, L'Oreal intends to exercise its rights pursuant to the provisions ofsections 428 to 430F (inclusive) of the Act to acquire compulsorily theremaining The Body Shop Shares in respect of which the Offer has not beenaccepted on the same terms as the Offer. It is anticipated that cancellation of listing on the Official List andadmission to trading on the London Stock Exchange will take effect no earlierthan 20 business days either (i) after L'Oreal has by virtue of itsshareholdings and acceptances of the Offer, acquired or agreed to acquire issuedshare capital carrying 75 per cent. of the voting rights of The Body Shop or(ii) on the first date of issue of compulsory acquisition notices under section429 of the Act. L'Oreal will notify The Body Shop Shareholders when therequired 75 per cent. has been attained and confirm that the notice period hascommenced and the anticipated date of cancellation. De-listing wouldsignificantly reduce the liquidity and marketability of any The Body Shop Sharesnot assented to the Offer at that time. It is also intended that, following the Offer becoming or being declaredunconditional, The Body Shop will be re-registered as a private company underthe relevant provisions of the Companies Act. 16. General The Offer Document and Form of Acceptance, which will include a letter ofrecommendation from the Chairman of The Body Shop, will be despatched to TheBody Shop Shareholders by L'Oreal as soon as practicable. The Offer will be on the terms and subject to the conditions set out herein andin Appendix 1 and to be set out in the Offer Document. This announcement does not constitute an offer to sell or an invitation topurchase any securities or the solicitation of an offer to buy any securities,pursuant to the Offer or otherwise. The Body Shop Shareholders are advised toread carefully the formal documentation in relation to the Offer once it hasbeen despatched. This will contain the full terms and conditions of the Offer,including details of how the Offer may be accepted. The bases and sources of certain financial information contained in thisannouncement are set out in Appendix 2 to this announcement. Certain terms usedin this announcement are defined in Appendix 4 to this announcement. Enquiries: L'Oreal General +33 1 47 56 70 00 Analysts and institutional investors of L'OrealMrs Caroline Millot +33 1 47 56 86 82 Individual Shareholders of L'Oreal and market authoritiesMr. Jean-Regis Carof +33 1 47 56 83 02 JournalistsMr. Mike Rumsby +33 1 47 56 76 71 JPMorgan Cazenove +44 207 588 2828 Mark BreuerBarry Weir The Body Shop For all investor relations and media queries contact: Brunswick +44 207 404 5959 Louise CharltonWilliam CullumDeborah SpencerDominic McMullan Merrill Lynch +44 207 628 1000 Kevin SmithJamie HeathMark Astaire (Corporate Broking)Peter Tracey (Corporate Broking) JPMorgan Cazenove, which is authorised by the Financial Services Authority, isacting exclusively for L'Oreal and no one else in connection with the Offer andwill not be responsible to anyone other than L'Oreal for providing theprotections offered to clients of JPMorgan Cazenove or for providing advice inrelation to the Offer or any other matters referred to in this announcement. Merrill Lynch is acting exclusively for The Body Shop and no one else inconnection with the Offer and will not be responsible to anyone other than TheBody Shop for providing the protections afforded to clients of Merrill Lynch orfor providing advice in relation to the Offer or any other matters referred toin this announcement. The availability of the Offer to The Body Shop Shareholders who are not residentin and citizens of the United Kingdom may be affected by the laws of therelevant jurisdictions in which they are located or of which they are citizens.Such persons should inform themselves of, and observe, any applicable legal orregulatory requirements of their jurisdictions. Further details in relation tooverseas shareholders will be contained in the Offer Document. Unless otherwise determined by L'Oreal, and permitted by applicable law andregulation, the Offer, including the Loan Note Alternative, will not be made,directly or indirectly, in, into or from, and will not be capable of acceptancein or from the United States, Canada, Australia or Japan or any jurisdictionwhere to do so would constitute a breach of securities laws in thatjurisdiction. Accordingly, copies of this announcement are not being, and mustnot be, mailed or otherwise forwarded, distributed or sent in, into or from theUnited States, Canada, Australia or Japan or any jurisdiction where to do sowould constitute a breach of securities laws in that jurisdiction. Personsreceiving this announcement (including custodians, nominees and trustees) shouldobserve these restrictions and should not send or distribute this announcementin, into or from any such jurisdictions. The Loan Notes to be issued in connection with the Offer have not been, nor willthey be, registered under the US Securities Act or under the securities laws ofany state or other jurisdiction of the United States (or under the securitieslaws of any other jurisdiction, the residents of which L'Oreal is advised totreat as Restricted Overseas Persons); the relevant clearances have not been,and will not be, obtained from the securities commission of any province,territory or jurisdiction of Canada; and no prospectus has been lodged with, orregistered by, the Australian Securities and Investments Commission or theJapanese Ministry of Finance. Accordingly, unless an exemption under such act orsecurities laws or unless otherwise determined by L'Oreal, and permitted byapplicable law and regulation, the Loan Notes may not be offered, sold, resold,delivered or transferred, directly or indirectly, in or into the United States,Canada, Australia or Japan or any other jurisdiction if to do so wouldconstitute a violation of the relevant laws of, or require registration thereofin, such jurisdiction or to, or for the account or benefit of, a person locatedin the United States, Canada, Australia or Japan. Forward Looking Statements This announcement includes certain "forward-looking statements". Thesestatements are based on the current expectations of the management of The BodyShop and L'Oreal and are naturally subject to uncertainty and changes incircumstances. The forward-looking statements contained herein includestatements about the expected effects on L'Oreal of the Offer, the expectedtiming and scope of the Offer, anticipated earnings enhancements, estimated costsavings and other synergies, costs to be incurred in achieving synergies, otherstrategic options and all other statements in this announcement other thanhistorical facts. Forward-looking statements include, without limitation,statements typically containing words such as "intends", "expects","anticipates", "targets", "estimates" and words of similar import. By theirnature, forward-looking statements involve risk and uncertainty because theyrelate to events and depend on circumstances that will occur in the future.There are a number of factors that could cause actual results and developmentsto differ materially from those expressed or implied by such forward-lookingstatements. These factors include, but are not limited to, the satisfaction ofthe conditions to the Offer, and L'Oreal's ability to successfully integrate theoperations and employees of The Body Shop, as well as additional factors, suchas changes in economic conditions, changes in the level of capital investment,success of business and operating initiatives and restructuring objectives,customers' strategies and stability, changes in the regulatory environment,fluctuations in interest and exchange rates, the outcome of litigation,government actions and natural phenomena such as floods, earthquakes andhurricanes. Other unknown or unpredictable factors could cause actual results todiffer materially from those in the forward-looking statements. Neither The BodyShop nor L'Oreal undertake any obligation to update publicly or reviseforward-looking statements, whether as a result of new information, futureevents or otherwise, except to the extent legally required. APPENDIX 1 CONDITIONS AND FURTHER TERMS OF THE OFFER The Offer, which will be made by JPMorgan Cazenove on behalf of L'Oreal, willcomply with the City Code and will be governed by English law and subject to thejurisdiction of the English courts. In addition, the Offer will be subject tothe terms and conditions to be set out in the Offer Document. The Offer will besubject to the following conditions: 1 valid acceptances of the Offer being received (and not,where permitted, withdrawn) by no later than 3:00 p.m. on the first closingdate of the Offer (or such later time(s) and/or date(s) as L'Oreal may, subjectto the rules of the Code, decide) in respect of not less than 90 per cent. (orsuch lesser percentage as L'Oreal may decide) of The Body Shop Shares to whichthe Offer relates, provided that this condition will not be satisfied unlessL'Oreal and/or any member of the L'Oreal Group shall have acquired or agreed toacquire (whether pursuant to the Offer or otherwise) The Body Shop Sharescarrying in aggregate more than 50 per cent. of the voting rights normallyexercisable at a general meeting of The Body Shop. For the purposes of thiscondition: 1.1 The Body Shop Shares which have been unconditionally allottedshall be deemed to carry the voting rights which they will carry upon issue; 1.2 the expression "The Body Shop Shares to which the Offerrelates" shall be construed in accordance with Sections 428 to 430F of theCompanies Act 1985; and 1.3 valid acceptances shall be deemed to have been received inrespect of The Body Shop Shares which are treated for the purposes of section429(8) of the Companies Act 1985 as having been acquired or contracted to beacquired by L'Oreal by virtue of acceptances of the Offer; 2 if the Offer constitutes a concentration with a Communitydimension within the scope of Council Regulation (EC) 139/2004 (the "Regulation"): 2.1 the European Commission having confirmed, in terms satisfactoryto L'Oreal, that it does not intend to initiate proceedings under Article 6(1)(c) of the Regulation in respect of the Offer or any aspect of the Offer; and 2.2 if a request under Article 9(2) of the Regulation has been madeby a European Union or EFTA state, either: 2.2.1 the European Commission having confirmed, in terms satisfactoryto L'Oreal, that it does not intend to refer the Offer or any aspect of theOffer to the competent authorities of such a European Union or EFTA state inaccordance with Article 9(3) of the Regulation; or 2.2.2 if the European Commission, in accordance with Article 9(3) ofthe Regulation, refers the Offer or any aspect of the Offer to the competentauthorities of such a European Union or EFTA state, that competent authorityindicating, in terms satisfactory to L'Oreal, that it does not intend toinitiate second phase proceedings (as provided for under the national laws ofthe relevant European Union or EFTA state) in respect of L'Oreal or any aspectof the Offer; 3 to the extent that the Offer constitutes a concentration oris otherwise subject to merger control filing, notification or approval in anyof Canada, Turkey, South Korea or Taiwan or the approval of the competent agencyin one of those jurisdictions is required before L'Oreal can acquire sharespursuant to the Offer, the receipt of evidence, in a form and substancesatisfactory to L'Oreal, that in relation to the Offer and the acquisition ofany shares in, or control of, The Body Shop by L'Oreal or any member of theL'Oreal Group, all applicable filings and notifications have been made, allapplicable waiting and/or other relevant time periods have expired, lapsed orbeen terminated and any required approvals have been obtained, unconditionallyor, if subject to conditions, on terms satisfactory to L'Oreal; 4 all required filings having been made under the UnitedStates Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended) and therules and regulations thereunder and the applicable waiting period havingexpired or been terminated as appropriate in connection with the Offer; 5 no central bank, government or governmental, quasi-governmental, supranational, statutory, regulatory or investigative body, tradeagency, court, professional association, or any other such body or person in anyjurisdiction (each a "Third Party") having given notice of a decision to take,institute or threaten any action, proceeding, suit, investigation, enquiry orreference, or having required any action to be taken, or otherwise having doneanything, or having enacted, made or proposed any statute, regulation, decisionor order which would: 5.1 make the Offer, its implementation or the acquisition orproposed acquisition of any The Body Shop Shares by L'Oreal void, unenforceableor illegal, or restrict, prohibit or delay to a material extent or otherwisematerially interfere with the implementation of, or impose material additionalconditions or obligations with respect to, or otherwise materially challenge orrequire material amendment of, the Offer or the acquisition of any The Body ShopShares by L'Oreal; 5.2 result in a material delay in the ability of L'Oreal, or renderit unable, to acquire some or all of The Body Shop Shares or require adivestiture by L'Oreal or any member of the L'Oreal Group of any shares in TheBody Shop; 5.3 require, prevent or delay the divestiture, or alter the termsenvisaged for any proposed divestiture, by L'Oreal or any member of the L'OrealGroup or by any member of The Body Shop Group of all or any part of theirrespective businesses, assets or properties, or impose any limitation on theirability to conduct their respective businesses (or any of them) or to own theirrespective assets or properties or any part of them, to an extent in any suchcase which is material in the context of the Offer; 5.4 impose any material limitation on, or result in a materialdelay in, the ability of L'Oreal or any member of the L'Oreal Group to acquireor to hold or to exercise effectively, directly or indirectly, all rights ofownership of shares, loans or other securities (or the equivalent) in The BodyShop or the ability of any member of The Body Shop Group or L'Oreal to hold orexercise effectively any rights of ownership of shares, loans or othersecurities in or in any respect which is material in the context of The BodyShop Group taken as a whole to exercise management control over any member ofThe Body Shop Group; 5.5 except pursuant to Part XIIIA of the Companies Act 1985,require any member of the L'Oreal Group or of The Body Shop Group to acquire oroffer to acquire any shares or other securities (or the equivalent) in, or anyasset owned by, any member of The Body Shop Group owned by any third party; 5.6 result in any member of The Body Shop Group ceasing to be ableto carry on business under any name which it presently does so, the consequencesof which would be material in the context of The Body Shop Group taken as awhole; 5.7 impose any limitation (other than relating to merger control)that is material in the context of the business of The Body Shop Group taken asa whole on the ability of any member of the L'Oreal Group or The Body Shop Groupto integrate or co-ordinate (to the extent that it is consistent with thisannouncement) the business of any member of The Body Shop Group, or any part ofit, with that of any member(s) of the L'Oreal Group and/or any other member ofThe Body Shop Group; 5.8 otherwise adversely affect the business, assets, liabilities,or profits or prospects of any member of the L'Oreal Group or of The Body ShopGroup, to an extent in any such case which is material in the context of TheBody Shop Group taken as a whole, and all applicable waiting and other time periods during which anysuch Third Party could take, institute or threaten any such action, proceeding,suit, investigation, enquiry or reference or otherwise so intervene havingexpired, lapsed or been terminated; 6 all necessary material notifications and filings, except anynotifications and filings relating to merger control, having been made inconnection with the Offer and all material statutory and regulatory obligationsin connection with the Offer in any jurisdiction having been complied with andall material authorisations, orders, recognitions, grants, consents, clearances,confirmations, certificates, licences, permissions and approvals("Authorisations") reasonably necessary in any jurisdiction for, or in respectof, the Offer and the acquisition or the proposed acquisition of The Body ShopShares by L'Oreal or any member of the L'Oreal Group, except any Authorisationrelating to merger control, having been obtained in terms reasonablysatisfactory to L'Oreal from all appropriate Third Parties, all or anyapplicable waiting and other time periods have expired, lapsed or beenterminated (as appropriate) and all such Authorisations (together with allmaterial Authorisations reasonably necessary to carry on the business of anymember of The Body Shop Group) remaining in full force and effect at the time atwhich the Offer becomes otherwise unconditional and there being no notice of anyintention to revoke, suspend, restrict, amend or not to renew any suchAuthorisations; 7 save as disclosed to any member of the L'Oreal Group or itsadvisers by or on behalf of The Body Shop prior to the date of this announcementor save as publicly announced by The Body Shop prior to the date of thisannouncement, there being no provision of any material arrangement, agreement,lease, licence, permit or other instrument to which any member of The Body ShopGroup is a party or by or to which any such member or any of its assets is ormay be bound or be subject, which as a consequence of the Offer or theacquisition or the proposed acquisition by L'Oreal or any member of the L'OrealGroup of any shares or other securities (or the equivalent) in The Body Shop orbecause of a change in the control or management of any member of The Body ShopGroup or otherwise, would result in, in any case to an extent which is materialin the context of The Body Shop Group taken as a whole: 7.1 any monies borrowed by, or any other indebtedness, actual orcontingent, of, any member of The Body Shop Group which is not already repayableon demand being or becoming repayable, or being capable of being declaredrepayable immediately or prior to their or its stated maturity, or the abilityof any such member to borrow monies or incur any indebtedness being withdrawn orinhibited; 7.2 the creation or enforcement of any mortgage, charge or othersecurity interest, over the whole or any part of the business, property orassets of any member of The Body Shop Group or any such mortgage, charge orother security interest (whenever arising or having arisen) becomingenforceable; 7.3 any such arrangement, agreement, lease, licence, permit orother instrument being terminated or adversely modified or affected or anyonerous obligation or liability arising or any adverse action being takenthereunder; 7.4 (other than in the ordinary course of business) any assets orinterests of any member of The Body Shop Group being or falling to be disposedof or charged or any right arising under which any such asset or interest couldbe required to be disposed of or charged; 7.5 any such member of The Body Shop Group ceasing to be able tocarry on business under any name under which it presently does so; 7.6 the value or financial or trading position, profits orprospects of The Body Shop or any member of The Body Shop Group being prejudicedor adversely affected; or 7.7 the creation of any liability (actual or contingent) by anymember of The Body Shop Group, in each case, to an extent which is material inthe context of The Body Shop Group taken as a whole; 8 save as disclosed in the Annual Report, publicly announcedthrough a Regulatory Information Service prior to the date of this announcementor disclosed to any member of the L'Oreal Group or its advisers by or on behalfof The Body Shop prior to the date of this announcement, no member of The BodyShop Group having since 26 February 2005: 8.1 issued or agreed to issue or authorised or proposed orannounced its intention to authorise or propose the issue of additional sharesof any class, or securities convertible into, or exchangeable for, or rights,warrants or options to subscribe for or acquire, any such shares or convertiblesecurities (save as between The Body Shop and wholly-owned subsidiaries of TheBody Shop and save for the issue of The Body Shop Shares to employees on theexercise of options granted under, or the grant of options under, The Body ShopShare Option Schemes); 8.2 (other than the second interim dividend in lieu of a final TheBody Shop dividend for the 52 weeks to 25 February 2006 of 4.4 pence per TheBody Shop Share) recommended, declared, paid or made or proposed to recommend,declare, pay or make any bonus issue, dividend or other distribution whetherpayable in cash or otherwise other than dividends (or other distributionswhether payable in cash or otherwise) lawfully paid or made to another member ofThe Body Shop Group; 8.3 (save for intra-The Body Shop Group transactions and other thanin the ordinary course of business) implemented, effected, authorised, proposedor announced its intention to implement, effect, authorise or propose anymerger, demerger, reconstruction, amalgamation, scheme, commitment oracquisition or disposal of assets or shares (or the equivalent thereof) in anyundertaking or undertakings, in any such case that is material in the context ofThe Body Shop Group taken as a whole or any change in its share or loan capital; 8.4 (save for intra-The Body Shop Group transactions and other thanin the ordinary course of business) disposed of, or transferred, mortgaged orcreated any security interest over any asset or any right, title or interest inany asset, in any such case that is material in the context of The Body ShopGroup taken as a whole or authorised, proposed or announced any intention to doso; 8.5 (save for intra-The Body Shop Group transactions) issued,authorised or proposed or announced an intention to authorise or propose, theissue of any debentures or (save for intra-The Body Shop Group transactions ortransactions under existing credit arrangements) incurred any indebtedness orcontingent liability which is material in the context of The Body Shop Grouptaken as a whole; 8.6 entered into or varied or authorised, proposed or announced itsintention to enter into or vary any contract, arrangement, agreement,transaction or commitment (whether in respect of capital expenditure orotherwise) which is of a long term, unusual or onerous nature or magnitude orwhich involves or is reasonably likely to involve an obligation of such a natureor magnitude which is, in any such case, or which is or is likely to berestrictive on the business of any member of The Body Shop Group, which is, inany such case, material in the context of The Body Shop Group taken as a whole; 8.7 entered into or varied to a material extent or authorised,proposed or announced its intention to enter into or vary to a material extentthe terms of, or make any offer (which remains open for acceptance) to enterinto or vary to a material extent the terms of, any service agreement with anydirector or, save for salary increases, bonuses or variations of terms in theordinary course, senior executive of The Body Shop; 8.8 purchased, redeemed or repaid or announced a proposal topurchase, redeem or repay any of its own shares or other securities (or theequivalent) or reduced or made any other change to or proposed the reduction orother change to any part of its share capital to an extent that is material inthe context of The Body Shop Group taken as a whole, save for any sharesallotted upon the exercise of options granted under The Body Shop Share OptionSchemes or as between The Body Shop and wholly-owned subsidiaries of The BodyShop; 8.9 waived, compromised or settled any claim which is material inthe context of The Body Shop Group taken as a whole otherwise than in theordinary course of business; 8.10 terminated or varied the terms of any agreement or arrangementbetween any member of The Body Shop Group and any other person in a manner whichwould or might reasonably be expected to have a material adverse effect on thefinancial position or prospects of The Body Shop Group taken as a whole; 8.11 (save as disclosed on publicly available registers) made anyalteration to its memorandum or articles of association; 8.12 made or agreed or consented to any significant change to the termsof the trust deeds constituting the pension schemes established for itsdirectors and/or employees and/or their dependants or to the benefits whichaccrue, or to the pensions which are payable, thereunder, or to the basis onwhich qualification for or accrual or entitlement to such benefits or pensionsare calculated or determined or to the basis upon which the liabilities(including pensions) of such pension schemes are funded or made, or agreed orconsented to any change to the trustees involving the appointment of a trustcorporation; 8.13 been unable, or admitted in writing that it is unable, to pay itsdebts or having stopped or suspended (or threatened to stop or suspend) paymentof its debts generally or ceased or threatened in writing to cease carrying onall or a substantial part of any business which is material in the context ofThe Body Shop Group taken as a whole; 8.14 (other than in respect of a member which is dormant and wassolvent at the relevant time) taken or proposed any corporate action or had anyaction or proceedings or other steps instituted against it for its winding-up(voluntary or otherwise), dissolution or reorganisation or for the appointmentof a receiver, administrator, administrative receiver, trustee or similarofficer of all or any material part of its assets or revenues or any analogousproceedings in any jurisdiction or appointed any analogous person in anyjurisdiction; or 8.15 entered into any agreement, arrangement or commitment or passedany resolution or made any proposal or announcement with respect to, or toeffect, any of the transactions, matters or events referred to in this condition8; 9 since 26 February 2005, save as disclosed in the AnnualReport, or save as disclosed to any member of the L'Oreal Group or its advisersby or on behalf of The Body Shop or except as publicly announced by The BodyShop (by the delivery of an announcement to a Regulatory Information Service),in each case prior to the date of this announcement, there having been: 9.1 no adverse change in the business, assets, financial or tradingposition or profits or prospects of any member of The Body Shop Group which ismaterial in the context of The Body Shop Group taken as a whole; 9.2 no litigation, arbitration proceedings, prosecution or otherlegal proceedings having been announced or instituted by or against or remainingoutstanding against or in respect of any member of The Body Shop Group and noinvestigation by or written complaint or reference to any Third Party (otherthan relating to merger control) against or in respect of any member of The BodyShop Group having been threatened in writing, announced or instituted orremaining outstanding, against or in respect of any member of The Body ShopGroup and which in any such case is material in the context of The Body ShopGroup taken as a whole; or 9.3 no contingent or other liability having arisen or becomeapparent which might reasonably be expected to adversely affect any member ofThe Body Shop Group and which, in any case, is material in the context of TheBody Shop Group taken as a whole; 10 save as publicly announced by the delivery of an announcementto a Regulatory Information Service prior to the date of this announcement or asotherwise disclosed in the Annual Report or to any member of the L'Oreal Groupor its advisers by or on behalf of The Body Shop prior to the date of thisannouncement, L'Oreal not having discovered that the financial, business orother information concerning The Body Shop Group publicly announced or disclosedat any time by or on behalf of any member of The Body Shop Group is misleading,contains a misrepresentation of fact or omits to state a fact necessary to makethe information contained therein not misleading and which is, in any case,material in the context of The Body Shop Group taken as a whole; 11 save as disclosed to any member of the L'Oreal Group or itsadvisers by or on behalf of The Body Shop prior to the date of thisannouncement, in relation to any release, emission, discharge, disposal or otherfact or circumstance which causes or might reasonably be expected to causepollution of the environment or harm to human health, no past or present memberof The Body Shop Group having, in any manner or to an extent which is materialin the context of The Body Shop Group taken as a whole: (i) committed anyviolation of any laws, statutes, ordinances or regulations of any Third Party;and/or (ii) incurred any liability (whether actual or contingent) with respectthereto. For the purposes of the conditions set out in this Appendix 1: (i) "parent undertaking", "subsidiary undertaking", "associatedundertaking" and "undertaking" have the meanings given by the Companies Act1985, but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A of theCompanies Act 1985; and (ii) "substantial interest" means a direct or indirect interestin 20 per cent. or more of the voting equity capital of an undertaking. L'Oreal reserves the right to waive, in whole or in part, all or any of theabove conditions 2 to 11 (inclusive). If L'Oreal is required by the Panel to make an offer for The Body Shop Sharesunder the provisions of Rule 9 of the Code, L'Oreal may make such alterations toany of the above conditions, including condition 1 above, and terms of the Offeras are necessary to comply with the provisions of that Rule. The Offer will lapse unless conditions 2 to 11 (inclusive) set out above havebeen fulfilled or, where permitted, waived or, where appropriate, have beendetermined by L'Oreal to be or remain satisfied, by midnight on the 21st dayafter the later of the first closing date of the Offer and the date on whichcondition 1 is fulfilled (or in each case such later date as L'Oreal may, withthe consent of the Panel, decide). L'Oreal shall be under no obligation to waive(if capable of waiver), to determine to be or remain satisfied or to treat asfulfilled any of conditions 2 to 11 (inclusive) by a date earlier than thelatest date specified above for the fulfilment of that condition. The Offer will lapse (unless otherwise agreed with the Panel) if, before thelater of the first closing date of the Offer and the date when the Offer becomesor is declared unconditional as to acceptances: (i) the European Commission initiates proceedings under Article6(1)(c) of the Regulation; or (ii) following a referral by the European Commission underArticle 9.1 of the Regulation to a competent authority in the United Kingdom,there is a subsequent reference to the Competition Commission. If the Offer lapses, the Offer will cease to be capable of further acceptanceand accepting The Body Shop Shareholders and L'Oreal shall cease to be bound byForms of Acceptance submitted at or before the time when the Offer so lapses. APPENDIX 2 SOURCES OF INFORMATION AND BASES OF CALCULATION (i) The value placed by the Offer on the existing issued share capitalof The Body Shop is based on 217,434,814 The Body Shop Shares in issue on 16March 2006, being the last dealing day prior to the date of this announcement. (ii) The closing mid-market share prices on 21 February 2006, 22 February2006 and 16 March 2006 are taken from the Official List. (iii) Unless otherwise stated, the financial information relating to TheBody Shop is extracted from the audited consolidated financial statements of TheBody Shop for the financial year to 26 February 2005 and has been restated inaccordance with IFRS. (iv) The financial information relating to L'Oreal is extracted from theaudited consolidated financial statements of L'Oreal for the year ended 31December 2005 and has been prepared in accordance with IFRS. APPENDIX 3 DETAILS OF IRREVOCABLE UNDERTAKINGS AND CALL OPTION The following holders of The Body Shop Shares have given irrevocableundertakings to accept the Offer: Name Number of The Body Shop Shares % ofissued share capital Dame Anita Roddick 20,210,836 9.3% Mr Gordon Roddick 18,960,836 8.7% Mr Adrian Bellamy 7,425,000 3.4% Mr Peter Saunders 111,046 0.1% Mrs Irene Miller 200,000 0.1% Mr Jack Keenan 70,000 0.0% Total 46,977,718 21.6% In addition to the irrevocable undertakings described above, L'Oreal has beengranted a call option which gives L'Oreal the ability to require that thefollowing The Body Shop Shares are tendered to the Offer: Name Number of The Body Shop Shares % ofissued share capital Beaverbridge Holdings Limited 45,666,768 21.0% Total 45,666,768 21.0% APPENDIX 4 DEFINITIONS The following definitions apply throughout this announcement unless the contextrequires otherwise. "Act" the Companies Act 1985, as amended"Annual Report" the annual report and accounts of The Body Shop for the year ended 26 February 2005"Australia" the commonwealth of Australia, its territories and possessions and all areas subject to its jurisdiction and all political sub-divisions thereof"Authorisations" has the meaning given to it in paragraph 6 of Appendix 1 of this announcement"Canada" Canada, its provinces and territories and all areas subject to its jurisdiction and all political sub-divisions thereof"City Code" or "Code" the City Code on Takeovers and Mergers"EFTA States" Iceland, Liechtenstein and Norway"EPS" earnings per share"Form of Acceptance" the form of acceptance and authority to be issued in connection with the Offer and which will accompany the Offer Document"FSA" the Financial Services Authority"IFRS" International Financial Reporting Standards"Japan" Japan, its cities and prefectures, territories and possessions"JPMorgan Cazenove" JPMorgan Cazenove Limited, 20 Moorgate, London EC2R 6DA"L'Oreal" L'Oreal S.A."L'Oreal Group" L'Oreal, its subsidiaries, subsidiary undertakings and associated undertakings and any other body corporate, partnership, joint venture or person in which L'Oreal and such undertakings (aggregating their interests) have a direct or indirect interest of 20 per cent. or more of the voting or equity capital or equivalent"LIBOR" The London Inter-Bank Offered Rate expressed as a rate per annum for six month sterling deposits of £1 million commencing on the first business day of the relevant interest period which appears on the Telerate Page 3750 or Telerate Page 3740 (as appropriate) at or about 11:00a.m. on such date"Listing Rules" the rules and regulations made by the Financial Services Authority in its capacity as the UK Listing Authority under the Financial Services and Markets Act 2000, and contained in the UK Listing Authority's publication of the same name"Loan Note Alternative" the alternative by which The Body Shop Shareholders (other than The Body Shop Shareholders in any Restricted Jurisdiction) who validly accept the Offer may elect to receive Loan Notes instead of all or part of the cash consideration to which they would otherwise have been entitled under the Offer"Loan Note Instrument" the instrument constituting the Loan Note"Loan Notes" the floating rate unsecured Loan Notes due 30 June 2013 of L'Oreal to be issued pursuant to the Loan Note Alternative"London Stock Exchange" London Stock Exchange plc"Merrill Lynch" Merrill Lynch International, 2 King Edward Street, London, EC1A 1HQ"Offer" the recommended cash offer being made by JPMorgan Cazenove on behalf of L'Oreal to acquire all of The Body Shop Shares on the terms and subject to the conditions to be set out in the Offer Document and the Form of Acceptance, including, where the context requires, any subsequent revision, variation, extension or renewal of such offer and includes any election available thereunder"Offer Document" the document to be despatched on behalf of L'Oreal containing the terms and conditions of the Offer and, where appropriate, any other document(s) containing terms and conditions of the Offer constituting the full terms and conditions of the Offer"Official List" The Daily Official List of the UK Listing Authority"Panel" The Panel on Takeovers and Mergers"Regulation" has the meaning given to it in paragraph 2 of Appendix 1 of this announcement"Regulatory Information Service" any of the services set out in Appendix 3 to the Listing Rules of the UKLA"Restricted Jurisdiction" any of the United States, Australia, Canada or Japan or any jurisdiction where extension or acceptance of the Offer would violate the law of that jurisdiction"Restricted Overseas Persons" a person (including an individual, partnership, unincorporated syndicate, limited liability company, unincorporated organisation, trust, trustee, executor, administrator or other legal representative) in, or resident in, or any person whom L'Oreal reasonably believes to be in, or resident in, the United States, Canada, Australia or Japan and persons in any other jurisdiction (other than persons in the UK) whom L'Oreal is advised to treat as restricted overseas persons in order to observe the laws of such jurisdiction or to avoid the requirement to comply with any governmental or other consent or any registration, filing or other formality which L'Oreal regards as unduly onerous"The Body Shop" or the "Company" The Body Shop International plc"The Body Shop Group" The Body Shop, its subsidiaries, subsidiary undertakings and associated undertakings and any other body corporate, partnership, joint venture or person in which The Body Shop and such undertakings (aggregating their interests) have a direct or indirect interest of 20 per cent. or more of the voting or equity capital or the equivalent"The Body Shop Shareholders" or "Shareholders" the holders of The Body Shop Shares"The Body Shop Share Option Schemes" The Body Shop 1991 Share Option Scheme, The Body Shop Sharesave Option Scheme, The Body Shop 1995 Employee Share Option Scheme, The Body Shop 2001 Savings Related Share Option Scheme, The Body Shop 2002 Employee Share Option Scheme (Inland Revenue Approved), The Body Shop 2002 Employee Share Option Scheme (Unapproved) and The Body Shop 2005 Performance Share Plan"The Body Shop Shares" the existing unconditionally allotted or issued and fully paid ordinary shares of 5 pence each in the capital of The Body Shop and any further such ordinary shares which are unconditionally allotted or issued while the Offer remains open for acceptance or before such earlier date as L'Oreal (subject to the City Code) may determine, not, unless the Panel so permits, being earlier than the date on which the Offer is declared unconditional as to acceptances or, if later, the first closing date of the Offer"Third Party" has the meaning given to it in paragraph 5 of Appendix 1 of this announcement"UKLA" the UK Listing Authority, being the Financial Services Authority Limited acting in its capacity as the competent authority for the purposes of Part IV of the Financial Services and Markets Act 2000"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland"United States" or "US" the United States of America, its territories and possessions, any State of the United States of America and the District of Columbia"US Securities Act" The United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder For the purposes of this announcement, "subsidiary", "subsidiary undertaking", "undertaking" and "associated undertaking" have the respective meanings giventhereto by the Act. All the times referred to in this announcement are London times. References to the singular include the plural and vice versa. • means Euros, the lawful currency of the European Union. £ and pence means Pounds and Pence Sterling, the lawful currency of the UnitedKingdom. -------------------------- * This statement should not be interpreted to mean that the EPS for the currentor future financial years will necessarily match or exceed the historicalpublished EPS. * This statement should not be interpreted to mean that the EPS for the currentor future financial years will necessarily match or exceed the historicalpublished EPS. This information is provided by RNS The company news service from the London Stock Exchange
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