Estee Lauder, Puig in talks over planned beauty mega-merger

Estee Lauder and Spanish beauty company Puig said on Monday (March 23) that they were discussing a possible business combination that would unite major beauty and fragrance names, including Tom Ford, Carolina Herrera, Rabanne and Clinique within a single group.

If completed, the transaction would create a luxury beauty company valued at about $40 billion and strengthen the two firms’ position in the global fragrance market, where demand has begun to cool after several years of strong post-pandemic expansion.

The talks between Estee Lauder and Barcelona-based Puig come only a few months after Gucci parent Kering agreed to sell its beauty division to L’Oréal for $4.7 billion.

That transaction handed L’Oréal control of Kering’s fragrance house Creed, known for Aventus perfumes priced at about $500 a bottle, and granted it long-term exclusive rights to develop products under Kering fashion brands including Bottega Veneta and Balenciaga, adding to a perfume portfolio that already includes YSL, Armani, Prada and Valentino.

One person familiar with the matter told Reuters that one reason behind a potential tie-up between Estee Lauder and Puig was to create a business better equipped to challenge L’Oréal.

Investors reacted negatively to the news.

Shares in Estee Lauder, which has a market value of roughly $31 billion, finished more than 7% lower.

Its brand portfolio includes Bobbi Brown, La Mer and fragrance labels such as Le Labo, Jo Malone and Kilian Paris.

Puig, whose brands include Jean Paul Gaultier, Byredo and Charlotte Tilbury, is valued at more than $10 billion.

A combination could support Estee Lauder’s turnaround efforts at a time when the company is grappling with subdued consumer spending in the United States.

Last month, its full-year outlook missed Wall Street expectations as weakness in the Americas outweighed improving trends in China and Europe.

Rachel Wolff, an analyst at eMarketer, said a merger of that scale could reshape the beauty sector, but warned it might also create further difficulties for Estee Lauder.

She said a deal of such size could make it harder for the company to innovate and remain competitive against faster-moving rivals.

Puig also reported a slowdown in fragrance growth last month as sales continued to normalise after the pandemic boost, something Wolff said could further complicate Estee Lauder’s growth ambitions.

The announcement also comes as deal activity in the beauty industry picks up.

Elf Beauty bought Hailey Bieber’s skincare brand Rhode last year, while Coty has started a strategic review of its consumer beauty business that could lead to the sale of labels including CoverGirl and Rimmel.

The Wall Street Journal reported, citing people familiar with the talks, that Estée Lauder and Puig had discussed a combination involving both cash and stock. In separate statements, the companies said no agreement had been reached, and there was no certainty that any deal would go ahead or on what terms.

Fragrance remains a key area for Estée Lauder.

The division is its third-largest by revenue and has posted steady growth, helped in part by Gen Z consumers who have made perfume a staple purchase.

In the company’s latest quarterly results, fragrance sales rose 9%, while total net sales increased 6%.

Estee Lauder has a long record of expanding through acquisitions.

In 2022, it bought US fashion label Tom Ford for $2.8 billion, its largest acquisition so far, and has since identified fragrance as one of the main engines of its recovery strategy.

Nik Modi, an analyst at RBC Capital Markets, said the proposed combination made strategic sense because Estee Lauder lagged peers such as L’Oréal and LVMH in fragrance, and a deal with Puig would help close that gap.

Puig derives more than 70% of its revenue from fragrances.

The company, which completed Spain’s biggest initial public offering in nearly a decade in 2024, reported a 12% increase in net profit for 2025 last month.

Reuters