The move frees Oriflame up from the loss-making operation, while providing an entirely new line of business for Premier Direct Group (PDG), which until now has only been involved in selling a variety of household goods to UK and international markets.
PDG says it will continue the operations as they stand in both the UK and Ireland, while Oriflame confirmed that the terms of the deal mean that it will be liable for all the outstanding debt, which currently amount to €4 million.
Oriflame also confirmed that this transaction will impact the full year results for 2005.
The Sweden-based cosmetic player reported losses of €1.8 million on sales of €4.9 million for its UK and Ireland operations in 2004, and is also forecasting a loss of €1.8 million on sales of €4.3 million for the full 2005 financial year.
Both companies have agreed that PDG will continue to operate Oriflame's existing UK and Ireland business as a franchise, from 1st January, 2006 onwards. This means that PDG will market and sell products as well as catalogues supplied by Oriflame through its existing direct sales channels.
Orliflame claims that the agreement will enable the operations to break even during the course of the next three years.
The company reported second and third quarter results well down on the same period in 2004. It blamed its rapid expansion into the developing markets of Russia and China, together with the impact of its poor performance in the UK as being the main reasons for this performance.
Sales for the nine months up to September stood at €521 million, a jump of 10 per cent in euro currency terms - representing strong sales growth in the CIS and Baltic region, where sales grew by 27 per cent.
Over the nine month period, this profit before tax stood at €66.1 million, a rise of rise of 5 per cent during the same period in 2004.
PDG says it will be tapping into its existing direct sales channels to both develop Oriflame's business in the crowded direct sales segment, as well as maximizing on existing synergies between the two companies.