Estee Lauder is in the talks for a potential merger with Spanish beauty group Puig, the companies said on Monday, according to a Reuters report. If it goes through, the deal will bring leading beauty and fragrance brands like Tom Ford, Carolina Herrera, Rabanne and Clinique under one roof.
“No final decision has been made, and no agreement has been reached,” Estée Lauder said in a statement. The deal would create a $40 billion luxury beauty group and improve the companies’ position in the fragrance industry.
Shares of the U.S. beauty company were down nearly 8% following the news, while Puig’s stock rose roughly 3%. Estee Lauder and Puig have discussed a combination involving a mix of cash and stock, the Wall Street Journal reported, citing people familiar with the talks.
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This deal could potentially help drive Estee Lauder’s turnaround efforts amid struggles. The company has been struggling amid ongoing headwinds from tariffs and its restructuring as it enacts its “Beauty Reimagined” turnaround plan to revitalize the business. In its second-quarter earnings report last month, the beauty retailer said it’s expecting a $100 million hit to its full-year profitability due to tariff impacts.
Estee Lauder’s annual outlook fell short of Wall Street estimates, with the weak demand in the Americas overshadowing the improving trends in China.
“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.”
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RBC Capital Markets analyst Nik Modi said the deal makes sense “from a strategic standpoint.” “Estee Lauder has a big gap in its portfolio with fragrances relative to the likes of L’Oreal and LVMH and this combination would fill that gap,” Modi said. Puig brings in more than 70% of its revenues from fragrances.
This deal comes just a few months after another high-profile deal in the beauty industry. Gucci-owner Kering agreed to sell its beauty business to L’Oreal for $4.6 billion. This deal allows L’Oreal to take over Kering’s fragrance line Creed, which former CEO Francois-Henri Pinault acquired in 2023 for 3.5 billion euros ($3.8 billion), as well as exclusive rights to develop fragrance and beauty products for 50 years under Kering’s fashion labels including Bottega Veneta and Balenciaga. L’Oreal also gets the Gucci license for 50 years, once a deal with Coty expires. Analysts believe this deal will last till 2028.