Puig-Estée Lauder, 40 billion merger blows up: Spanish group's share price plummets

Negotiations on a possible merger between Puig and The Estée Lauder Companies broke down and the market immediately redrew the prospects of the two global beauty groups. The reaction on the stock market was sharp: Puig's share lost as much as 14%, recording its worst session since the 2024 listing and closing at EUR 15.27, down 13.44%. Estée Lauder, on the other hand, gained more than 10 per cent in mid-session. The halt to negotiations puts an end to a project that could have given rise to a global champion of luxury cosmetics and perfumery with an aggregate value of around $40 billion, at a time when the beauty industry is experiencing a global growth slowdown and operators are seeking economies of scale to sustain margins and geographical presence.

For Puig, the backlash was immediate. The Catalan group had benefited from a sharp rise in shares after rumours of negotiations last March, fuelled by expectations of a possible strategic transformation of the company led by the Puig family. With the failure of the negotiations, however, the market has returned to focus on the group's operating fundamentals, in particular the slowdown in growth in the fragrances segment and the persistent difficulties related to travel retail and some international markets, including the Middle East. According to analysts at JPMorgan Chase, investors' attention will again shift to quarterly results and the group's ability to sustain the growth rates seen in recent years. In April, Puig had already pointed to a slowdown in sales in the first quarter, an element that is now coming back under scrutiny.

Puig reiterated in a note that it will continue to focus on the execution of the industrial strategy already outlined and emphasised that it maintains a sufficiently flexible financial structure to evaluate future selective acquisition transactions.It now remains to be seen what the Spanish group's next strategic step will be. The Capital Markets Day originally scheduled for 14 April had been postponed precisely because of the negotiations with Estée Lauder. The market now awaits a new convocation of the event, together with the presentation of the business plan update.

The market's reading on Estée Lauder was different. In recent months, Wall Street had looked cautiously at the hypothesis of a maxi-merger, fearing that a complex integration could further slow down the relaunch plan launched by new CEO Stephane de La Faverie. The American group remains, in fact, committed to a profound industrial and commercial restructuring with a strategy that focuses on strengthening its premium positioning, accelerating the launch of new products, and increasing marketing investments in the main global markets, with particular attention to the recovery of demand in China and intravel retail. In recent weeks, the group had, moreover, revised upwards its annual profit forecasts and announced up to 3,000 additional job cuts as part of its global reorganisation plan.

Analysts at Bank of America called the end of negotiations a 'positive catalyst' for the stock, arguing that investors' focus can now return to business fundamentals and the efficiency plan. Indeed, Estée Lauder aims to generate gross benefits of between USD 1 billion and USD 1.2 billion by 2027 by reducing operating costs.