Beauty Giant Merger Could Create $40 Billion Company

Spanish beauty company Puig saw its stock price soar 16% following news of potential merger discussions with cosmetics giant Estee Lauder. The proposed deal would combine major beauty brands like Tom Ford, Carolina Herrera, and Clinique under one corporate umbrella.

Stock prices for Spanish beauty company Puig experienced their strongest single-day performance ever on Tuesday, climbing approximately 16% after both companies confirmed ongoing discussions about a possible merger with Estee Lauder.

If finalized, this business combination would establish a $40 billion luxury cosmetics empire, uniting internationally recognized beauty and perfume labels including Tom Ford, Carolina Herrera, Rabanne and Clinique within a single organization.

This merger would position the new entity strategically within the worldwide fragrance market, which has seen declining consumer demand following multiple years of robust recovery after the pandemic. Puig generates over 70% of its income through fragrance sales.

“While valuation of beauty assets is under pressure in the broader space, we would think a deal would have to be at a substantial premium to the current share price,” J.P. Morgan said in a note to investors.

According to a source with knowledge of the negotiations who spoke with Reuters on Monday, one key motivation for combining Estee Lauder and Puig involves creating a company better equipped to rival L’Oreal in the competitive beauty market.

These merger conversations are occurring only months following Kering’s decision to transfer its beauty division to L’Oreal in a $4.7 billion transaction. Kering is the parent company of luxury brand Gucci.

Meanwhile, Estee Lauder’s stock performance on the New York exchange declined 7.7% when markets closed Monday.