Puig runs in Madrid on speculation of a 5bn takeover bid by Estee Lauder

(Il Sole 24 Ore Radiocor) - The stock of Puig Brands is racing in Madrid, leading the Ibex 35. The trend is driven by rumours of a possible takeover bid (Opa) by Estee Lauder. According to the Spanish business newspaper Expansion, the US cosmetics giant has instructed JPMorgan to structure financing of around EUR 5 billion to support a potential takeover bid for the Catalan company that owns the Carolina Herrera, Paco Rabanne, Jean Paul Gaultier and Nina Ricci brands, among others.

A key element of the negotiation, according to sources, would be the shareholding structure: both companies have multiple voting share systems that allow the founding families to retain control (approximately 93% of the voting rights for the Puigs and 82% for the Lauders). Therefore, it is expected that, if an agreement is reached between the parties, most of the transaction will be structured through an exchange of shares with preferential voting rights between the two families, with the Puigs set to become major shareholders in the combined group anyway.

Another of the bottlenecks would be the cash component of the takeover bid: in order to guarantee the exit to the minority shareholders, Estee Lauder would have to secure between EUR 3 and 3.5 billion, as 'the regulations require that the bidder must guarantee 100 per cent of the cash component'. Added to this would be the need to refinance approximately EUR 1.5 billion of Puig's gross debt in the event of a change of control. The total amount could, however, become less if the Puig family also agreed with the Lauders on an equity swap for its own ordinary shares, 'or if the Spanish group's cash reserves were used to reduce debt,' Expansion speculates.

From a financial point of view, other institutions, such as Bank of America, Bnp Paribas, Citi and Mufg, could be involved in the dossier in addition to Jpm. If completed, the operation 'would create one of the leading cosmetics groups globally', several analysts explained to the Spanish newspaper. A possible end goal for a hypothetical Estee Lauder-Puig, the sources explained, would be a double listing of the resulting group, both in New York and on the Spanish markets.