Estee Lauder in talks to merge with Jean Paul Gaultier-owner Puig in fragrance push

About this update from Puig Brands, S.a. Class B

By Neil J Kanatt and Deborah Mary Sophia Estee Lauder is in talks regarding a potential business combination with Spanish beauty group Puig, the companies said on Monday, in a deal that would bring some of the world's biggest beauty and fragrance brands such as Tom Ford, Carolina Herrera, Rabanne and Clinique under one roof. The deal would create a $40 billion luxury beauty group, and give the companies a strategic position in the global fragrance industry, which is facing a slowdown in demand after several years of strong post-pandemic growth. The discussions between Estee NYSE:EL and Barcelona-based Puig BME:PUIG come just months after Gucci-owner Kering EURONEXT:KER agreed to sell its beauty business to L'Oreal EURONEXT:OR for $4.7 billion. That deal gave L'Oreal control of Kering's fragrance line Creed — known for its $500-a-bottle Aventus fragrances — as well as long-term exclusive rights to develop products under Kering's fashion labels such as Bottega Veneta and Balenciaga, further boosting L'Oreal's blockbuster perfume portfolio, which includes the YSL, Armani, Prada and Valentino brands. Part of the rationale behind merging Estee Lauder and Puig is that a combined company will better compete with L'Oreal, a source familiar with the deal told Reuters on Monday. Shares of Estee Lauder, which has a market capitalization of around $31 billion, fell sharply on the news, ending the session more than 7% lower. The company's portfolio includes Bobbi Brown cosmetics, La Mer skincare products and fragrance brands Le Labo, Jo Malone and Kilian Paris. Puig, home to iconic perfume lines from Jean Paul Gaultier and Byredo, as well as cosmetics label Charlotte Tilbury, has a market value of over $10 billion. TURNAROUND TROUBLE AT ESTEE LAUDER The deal could help drive Estee Lauder's turnaround efforts as it battles sluggish U.S. consumer spending. Last month, the company's annual outlook fell short of Wall Street estimates, as weak demand in the Americas eclipsed improving trends in China and Europe. "A potential merger between Estée Lauder and Puig could shake up the beauty industry, but it could equally saddle Estée Lauder with more problems," said eMarketer analyst Rachel Wolff. "A deal of this magnitude could complicate Estée Lauder's ability to innovate and keep pace with more nimble competitors."Puig last month reported slowing growth in fragrances, as sa...

View stock analysis, news, and events for Puig Brands, S.a. Class B