(March 24): Estée Lauder Cos said it’s in talks to buy Puig Brands SA in a deal that would create a cosmetics giant with about US$20 billion ($25.57 billion) in annual sales.
The companies declined to offer details on the terms. Puig, based in Spain, has a market value of about €9 billion (US$10.4 billion or $13.34 billion).
A takeover of the Spanish company would give Estée Lauder such well-known perfume and fashion brands as Rabanne, Jean Paul Gaultier and Carolina Herrera, helping it compete better against the world’s largest cosmetics company, L’Oréal SA. For Puig, which generated about €5 billion in sales last year, the move comes after the company has struggled to expand profits since an initial public offering in 2024.
Puig shares soared as much as 17% on the talks in early Madrid trading, their biggest jump on record. Estée Lauder investors weren’t initially pleased, with its stock sinking about 8% at the close of New York trading.
“The potential acquisition of Puig would veer Estée Lauder off course,” according to Barclays analysts led by Lauren R Lieberman, who said the Barcelona-based company didn’t fit with Estée Lauder’s reorganisation including its plan to focus on niche, luxury priced fragrances — which only make up about 15% of Puig’s portfolio.
Estée Lauder’s shares have risen over the past year on optimism about a turnaround strategy under chief executive officer Stephane de la Faverie. Still, the beauty company’s most recent guidance boost underwhelmed investors. De la Faverie acknowledged that “there is more work to do”, during a conference call with analysts.
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Puig has also been undergoing big changes, recently announcing a new CEO. Marc Puig, a member of the founding family, gave up that role while remaining executive chairman, with a focus on mergers and acquisitions.
Puig is still controlled by the third generation of the family that created the company over a century ago.
The company’s stock was 37% lower than its IPO price at close on Monday. Early earnings disappointments and investor concerns around Puig’s exposure to fragrances — more than two thirds of its revenues — have weighed on the shares.
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“We are surprised that the Puig family will relinquish independence and majority control,” JPMorgan analyst Céline Pannuti said in a note, adding she believed “potential interest from other industry players could emerge”.
Integration risks
Estée Lauder has a portfolio of roughly two dozen cosmetics brands, including La Mer and The Ordinary. The addition of Puig, which owns labels Byredo and Charlotte Tilbury, would likely draw some questions from investors and analysts about the company’s ability to effectively integrate additional labels as the company is in the midst of a turnaround.
De la Faverie has been focused on shifting the retailing of the company’s brands to faster-growth online channels such as Amazon.com, which the company had avoided for years because of concerns that it would tarnish its high-end cachet. The company has also been selling lower-price items in part to appeal to a younger generation of shoppers.
In a prior role, the CEO oversaw Estée Lauder’s massive fragrance division. The unit’s sales performed well amid a broader, post-pandemic surge in demand. The potential deal to buy Puig is likely a bet on the continuing strength of those items.
A deal would also enable Estée Lauder take on France’s L’Oréal, which has outperformed Estée Lauder in the US. L’Oreal was quicker to seize on the post-pandemic boom for dermatological beauty products, with brands such as CeraVe.
The Financial Times reported on the potential deal earlier.
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