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Dealwatch: US firms lead on household names The Body Shop and Yodel as restructuring returns

The long-dormant restructuring market has had a shot in the arm recently, with the City teams of US stalwarts winning lead mandates on the administration of The Body Shop and a rescue deal of Yodel.

Jones Day and White & Case are handling the administration of cosmetic group The Body Shop, while Dechert and Weil advised parcel delivery business Yodel to secure a rescue deal backed by one of its rivals.

On 20 February, Tony Wright, Geoff Rowley and Alastair Massey of FRP Advisory partners were appointed as joint administrators of the Body Shop, and announced a restructuring plan to ‘secure the future’ of the high street retailer.

They said it is expected that The Body Shop will shut up to half of its 198 UK stores. They also announced the immediate closure of seven locations in England – four in London, and the rest in Warwickshire, Kent, and Bristol – citing ‘years of unprofitability’ that have rendered the portfolio chain ‘no longer viable’.

The statement also said that The Body Shop intends to restructure roles within its London head office, aiming to reduce headcount by around 40% to ‘align with a forward-looking strategy’.

A team from Jones Day, led by London restructuring partner David Harding, is also advising the group on its administration and working closely with FRP.

It was also announced last week that The Body Shop’s German business had entered administration, with the Düsseldorf District Court appointing White & Case partner Biner Bähr as its provisional insolvency administrator.

The company’s Belgian arm may be next, with its staff being told that administrators were to be appointed.

European private equity group Aurelius acquired The Body Shop only three months ago in November 2023 for £207m from the Brazilian cosmetics group Natura, which had bought it from L’Oreal for £880m in 2017.

Established in 1976 in Brighton, The Body Shop became a significant player in UK brands, as well as a much-loved high street fixture, first sold by founder Anita Roddick for £652m in 2006 to L’Oreal.

Frank Bouette, restructuring and insolvency partner at DMH Stallard told Legal Business: ‘The Body Shop is not the unique and groundbreaking brand it once was. When I was a teenager, you bought into the brand and its tribe. Being a founder-run business started in Brighton, focused on being an ethical brand against animal testing, it lost that when it was sold to L’Oreal and then Brazilian cosmetics group Natura.’

He continued: ‘It indicates that retailers are rationalising property portfolios and increasing their online presence as retail stores are expensive. I predict that The Body Shop will exist as a handful of stores, or probably as concessions in other stores, but not like the shop network it currently is.’

Howard Morris, former head of the London business restructuring and insolvency group at Morrison Foerster commented: ‘Remember, The Body Shop is over 50 years old and what was innovative then is not so now. Retail has changed so very much. An invaluable feature of restructuring in this country is how it enables the very swift surgery needed to ensure the viable elements of a business that’s become too weighed down with debt and liabilities, will survive.’

He added: ‘There’s clearly a plan being followed for the restructuring of The Body Shop and while we mustn’t shy away from the hardship to staff and other stakeholders restructuring in the face of financial crisis causes, many jobs and the social benefit of an employer will survive and hopefully thrive.’

The news of The Body Shop is the most recent addition to a roster of high street stores facing collapse. Less than a year ago, Next bought Cath Kidston for £8.5m after the embattled fashion brand filed for bankruptcy.

Meanwhile, parcel delivery company Yodel has been rescued from collapse through a deal facilitated by Dechert and Weil.

On 13 February, it was announced that Yodel had been acquired by YDLGP, a newly formed company, with backing from one of its competitors, logistics platform Shift.

It was also backed by a consortium of investors including Solano Partners, an independent boutique investment bank. Yodel was bought for an undisclosed sum.

Dechert’s team was led by Adam Plainer, co-chair of the firm’s global financial restructuring group, and restructuring partner Kay Morley, along with corporate partner Chris Field and employment partner Jason Butwick. Weil private equity partners James Harvey and Marco Compagnoni acted as main deal counsel on the sale.

In June of last year, Shift acquired Tuffnells, a company specialising in freight with irregular dimensions or weight. Following the completion of this deal, Yodel stated that it would integrate itself with the Tuffnells brand and Shift’s AI platform, forming part of a new ‘super scale’ logistics platform.

Plainer told LB: ‘Yodel is a good platform for what it does, so it was attractive to many buyers. The tech platform fits well with the buyer who bought it. The underlying platform is well developed and people want to use it. We’re delighted to save potentially 10,000 jobs.’

Yodel handles over 190 million deliveries annually across its network of 50 sites, including 47 customer delivery depots and 3 sortation hubs.

Mike Hancox, CEO of Yodel was optimistic about the future of Yodel backed by ‘support of the new shareholders and the future benefits of the Shift technology platform’.

He added: ‘Our customers have always been our priority and the transaction announced today allows us to ensure continuity for them, as well as our employees and wider stakeholders.’

Willkie restructuring partner Edward Downer told LB: ‘Some “household name” consumer businesses have required financial restructuring or rescue in recent months. This trend is not limited to high street brands but has also included e-retailers and retail services businesses.’

He continued: ‘The UK legal toolkit to help restructure or rescue these businesses has proven really useful in this context. Notwithstanding the high interest rate environment and other macro pressures, the UK restructuring framework and processes have been essential in attracting interest from industry competitors and financial investors willing to try to turn these businesses around.’