Ontario judge authorizes sales process for The Body Shop Canada

TORONTO — An Ontario judge has authorized a sale process which could see The Body Shop Canada land new owners.

During a virtual court hearing on Friday, Justice Peter Osborne granted an application from the beleaguered retailer, which wanted to be able to engage with potential buyers who could keep the business afloat.

The application said there was "no viable alternative" other than a sale to keep the business going.

The approval marks a new chapter in the cosmetics retailer's ongoing fight for survival, which began earlier this year when its parent company, a European private equity firm, stripped it of cash and pushed it into debt, forcing it to close 33 stores and layoff about 200 workers.

The arrangement and a separate creditor protection process undertaken by the parent company left The Body Shop Canada scrambling to source inventory and find a way forward.

By April, an affidavit from the head of the retailer's Canadian operations Jordan Searle said he had seen a "sufficient level of interest" in the business to believe the company should pursue a sale.

Searle did not name who was interested in buying the business that's been in Canada since 1980.

The chain's lawyers also did not divulge potential names on Friday but said 12 parties had come forward with interest in buying the brand with some "overlap" between U.K. bidders and those open to a Canadian purchase.

Any deal they reach depends on the parent company co-operating because the U.K. business oversees the chain's licences and has long managed finances and inventory for its international arms, Natalie Renner, a lawyer for The Body Shop Canada, said in court.

It is possible the U.K. business will want to sign franchise or licensing agreements with parties in Canada, she said, but she noted she unsure of the parent's preferred route because it is also up for sale.

Renner, however, has heard from the parent's lawyers that its own sales process is "well advanced" and could culminate soon.

When it comes time to parse through bids for the Canadian business, one lawyer said The Body Shop might not have much leverage.

"Candidly the company is not in a great bargaining position," David Bish, a lawyer for Cadillac Fairview, one of The Body Shop Canada's landlords, told the court Friday.

He explained that if a bidder is offering $1 million for the Canadian business but the U.K. parent will only co-operate with another putting forward $1, the Canadian arm might have to take the lesser bid.

Even though management has done a "good job" of keeping the company going and his client didn't oppose a sales process, Bish said he has viewed The Body Shop Canada's recent proceedings as "existential" from the start.

This report by The Canadian Press was first published July 5, 2024.

Tara Deschamps, The Canadian Press