We would not enter into (further buy-out talks) unless we had very good reason to believe that it was in the best interests of shareholders

Body Shop executive chairman Adrian Bellamy

"The Board has concluded that further continuation of these discussions is unlikely to result in proposals that fairly reflect the inherent value of the Body Shop," they said in a statement.

Mrs Roddick's husband Gordon, who jointly chairs the ethical cosmetics retailer, is also to step down, while chief executive Patrick Gournay is to quit "by mutual consent", the company said.

Buy-out hopes fade

News of the aborted takeover talks disappointed investors, who marked Body Shop shares 10% lower to 86.5p on Tuesday morning.

Body Shop history

1976 First Body Shop opens in Brighton, UK 1978 First foreign franchise opens in Brussels, Belgium 1998 Anita Roddick resigns as chief executive 1999 New CEO Patrick Gournay restructures the company

The cosmetics retailer, once the darling of the UK stock market and High Street, has been looking for buyers since falling out of favour with investors and shoppers alike during the late 1990s.

However, new chairman Adrian Bellamy said on Tuesday that the company has now "gone cold" on plans to sell the company.

"We would not enter into (further buy-out talks) unless we had very good reason to believe that it was in the best interests of shareholders," he told the Reuters news agency.

1980s success story

The Body Shop rose to prominence during the 1980s as the first major retail chain to emphasise its belief in ethical business methods.

Body Shop products were a hit with consumers

Its range of herbal toiletries, then considered novel, also proved highly popular with consumers.

But the company lost ground in the 1990s as mainstream competitors also began to sell natural, herbal-based products, undercutting Body Shop sales.

New management

This is the second time that attempts to sell the Body Shop have fallen through.

Last year, talks with Mexican nutritional supplements specialist Grupo Omnilife, who were reported to be putting together a �300m offer, came to nothing.

Mr Bellamy, a Body Shop director, is to take over as executive chairman, and Peter Saunders, the current chief executive of the company's North American operations, has been appointed chief executive.

"We believe that now is the right time to hand over the leadership of the company to Adrian and Peter who have successfully transformed our US business," Gordon Roddick said.

Mr Gournay is due to work alongside the incoming chief executive until April, the company said.

Two-phase resignation

Anita Roddick has signed a two-year consultancy contract with the company, while she and her husband plan to stay on as non-executive directors.

This is the second phase of Ms Roddick's gradual withdrawal from the company she founded in 1976.

In 1998, she stood down as chief executive, and two years later announced her intention to relinquish her role as chairman in order to concentrate on political campaigning.

The Roddicks still own a 25% stake in the company.

The Body Shop owns about 500 stores in 50 countries, and also runs a network of international franchised outlets.