Offer likely to be cash
French cosmetics giant L'Orèal has admitted it may be interested in buying eco-friendly cosmetics retailer Body Shop.

L'Orèal issued a statement this morning after Body Shop's shares surged yesterday, prompting City speculation that a management buy-out or bid was in the offing.

Any offer is likely to be in cash, said L'Orèal. However, no decision has been made, L'Orèal's Board has not been consulted and no approach has been made to Body Shop, L'Orèal's statement said.

Numis analyst Steve Davies said: 'Instances of major manufacturers buying retail businesses are pretty rare. We wonder how the Boots and Superdrugs of this world would feel about stocking L'Orèal products if the French company also owned one of their high street rivals.'

Body Shop shares closed last night 10.5 per cent higher at 247p, valuing the company at about£534 million. Founders, including Anita and Gordon Roddick, control a 40 per cent stake in the business.