Equities

UK Tycoon Jatania Set to Acquire Body Shop, Saves Stores

Jatania-led consortium nears deal to acquire The Body Shop's 100 UK outlets after administration.

By Max Weldon

7/10, 12:40 EDT
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Key Takeaway

  • British tycoon Mike Jatania's consortium is close to acquiring The Body Shop out of administration, retaining all UK stores.
  • LetterOne urges a review of sanctions policies affecting its investments, reporting a drop in net assets from $18.7 billion to $18.1 billion.
  • Clearlake Capital faces scrutiny over high-debt acquisitions but progresses with nearly $10 billion in commitments for its latest $15 billion fund.

Consortium Nears Deal for The Body Shop

A consortium led by British tycoon Mike Jatania is close to finalizing a deal to acquire the struggling UK cosmetics retailer The Body Shop out of administration, according to sources familiar with the matter. The investment firm Aurea Holding, managed by Jatania and former UBS Group AG banker Paul Raphael, is in exclusive negotiations to purchase The Body Shop after outbidding other contenders in an auction process.

The consortium also includes Charles Denton, the former CEO of fragrance and beauty brands Molton Brown and Erno Laszlo. The new ownership plans to retain all of The Body Shop’s UK stores, as per the sources who requested anonymity due to the private nature of the information.

The Body Shop entered administration in February, just three months after private equity firm Aurelius acquired the chain for £207 million ($266 million). Administrators from FRP Advisory subsequently closed underperforming stores, resulting in significant job losses. FRP attributed the retailer's collapse to financial difficulties under its previous owner, Natura & Co.

A representative for the consortium declined to comment, and a spokesperson for FRP was not immediately available for comment. The Body Shop’s international operations in Europe and parts of Asia were sold to a family office before the UK arm declared insolvency. FRP has been conducting an auction for the remaining business, which includes approximately 100 outlets, after determining that alternative restructuring was not feasible.

LetterOne Urges Sanctions Review

LetterOne, the investment group backed by Russian oligarchs, has called on governments to reconsider their sanctions policies to mitigate negative economic impacts. This appeal comes after the group reported a decline in the value of its net assets. In its annual business review, LetterOne acknowledged that sanctions on Russian billionaires Mikhail Fridman and Petr Aven have continued to "limit our ability to invest in businesses and support jobs."

"Very few businesses have had to manage the scope and complexity of challenges that L1 has been faced with since [Vladimir] Putin’s abhorrent war in Ukraine," said Mervyn Davies, chair of LetterOne, in the report. Despite not being under sanctions in any jurisdiction, the sanctions on two of its shareholders have hindered the business, affecting economies in the UK, EU, and US.

LetterOne, based in London, is not under sanctions after its oligarch founders resigned from the board in 2022. The group froze the shareholdings of the oligarchs, who now own less than 50% of the company and have no operational involvement. Fridman and Aven established LetterOne in 2013 after selling their stakes in oil major TNK-BP to state-run Rosneft. Their ambitions to build a business empire in the West were thwarted by sanctions following Russia's invasion of Ukraine.

In 2022, Khan and Kuzmichev sold their stakes in LetterOne and Alfa-Bank to Andrei Kosogov, a former partner not subject to sanctions. Fridman returned to Moscow last year, while Aven moved to Latvia. The EU's General Court annulled their inclusion on the sanctions list from 2022-23, citing insufficient evidence of their support for the Kremlin's war. However, they remain under sanctions under a separate EU legal designation and are challenging these in ongoing legal proceedings.

LetterOne reported a "significant fall" in assets under management in 2022, with net assets dropping from $18.7 billion in 2022 to $18.1 billion in 2023, mainly due to a changed valuation of its energy business. The group has $7 billion in liquidity for investment. Jonathan Muir, LetterOne's CEO, stated that the group had stabilized its business in 2023 and expressed optimism about its portfolio's strong position.

Clearlake Capital Faces Buyout Challenges

Clearlake Capital Group, known for owning Chelsea Football Club, is encountering scrutiny over the value of acquisitions made during the buyout boom. As the California-based private equity firm raises funds for its latest venture, some investors and creditors are questioning the worth of businesses acquired at high valuations and loaded with debt.

In 2020, Clearlake raised over $7 billion for its sixth flagship fund, investing in companies like healthcare software firm Provation and self-storage supplier Janus International. However, elevated interest rates are now weighing on these assets. Clearlake has the most distressed debt among its portfolio companies, with at least $10 billion in stressed credits, according to Bloomberg data.

"Clearlake would be a poster child for the excessive popularity of that particular asset class," said Jeff Hooke, a recently retired professor from Johns Hopkins Carey Business School. The firm’s rapid growth and high leverage levels have raised concerns among investors, especially in the current market conditions.

Despite these challenges, Clearlake's latest $15 billion fundraising is progressing well, with nearly $10 billion in commitments. The firm’s fourth and fifth funds have already returned more than the capital invested, bolstering investor confidence. However, some recent acquisitions, such as Confluence Technologies and Quest Software Inc., are under strain, prompting questions about the firm’s aggressive growth strategy.

Clearlake's use of continuation vehicles, where assets are sold to new funds managed by the firm, has also drawn attention. The firm is exploring a sixth such deal for digital-marketing company Constant Contact. Clearlake’s approach to distressed debt refinancing often protects returns for its backers, even in challenging situations.