Puig flies to Madrid, talks for maxi merger with Estée Lauder

(Il Sole 24 Ore Radiocor) - Puig Brands soared on the Madrid Stock Exchange after confirming talks on a potential merger with US giant Estée Lauder. The Spanish beauty group's share price was the biggest rise in the Ibex 35 index and also in the Stoxx Europe 600, adding to the 3.6 per cent gained on the eve of the merger. On the New York Stock Exchange on Monday, 23 March, Estée Lauder shares closed down 7.7 per cent.

On Monday evening Puig and Estée Lauder confirmed negotiations in the wake of press rumours. According to the Wall Street Journal, which cites sources familiar with the matter, a potential merger would take place via a mix of cash and stock. The two companies have specified that no agreement has been reached as yet and there is no guarantee that the transaction will go through. Together, the two groups have a combined turnover of over USD 20 billion in 2025. Their aggregation would create a luxury beauty giant with a stock market value of more than $40 billion, bringing together several well-known cosmetics and perfume brands.

Estée Lauder owns, among others, the Tom Ford Beauty and Clinique brands, while Puig owns Charlotte Tilbury and Rabanne. As analysts point out, a merger would give both companies a strategic position in the global perfume industry, which is facing a slowdown in demand after several years of strong post-pandemic growth and now risks further consumption compression due to rising inflation. The sector has already seen several deals in recent years. The main one was the sale by Kering, owner of Gucci, of its cosmetics division to L'Oréal for USD 4.7 billion.

According to a source close to the matter told Reuters, one of the motivations behind the possible merger between Estée Lauder and Puig is that the entity created by the merger of the two groups would be better equipped to compete with L'Oréal. Estée Lauder has a market capitalisation of around $31 billion, while Puig has a stock market value of over $10 billion. The fragrance segment is the third largest revenue driver for Estée Lauder and has been growing steadily. In the US group's latest quarterly results, the division recorded a 9% increase in sales, while total net revenue grew by 6%. The timing, on the other hand, is not the best for Lauder, which has embarked on a reorganisation while facing stagnant US consumer spending. Last month, the company's annual guidance fell short of Wall Street estimates as weak demand in America overshadowed improvement in China and Europe. Estée Lauder, which has a long history of external growth, made its biggest acquisition to date by taking over the Tom Ford brand in 2022 for $2.8 billion. The group also identified fragrances as a key growth driver in its restructuring.

Puig for its part derives more than 70% of its turnover from perfumery. The company, which in 2024 realised the largest IPO in Spain in a decade, announced last month a 12% increase in net profit for the financial year 2025.