Estee Lauder in talks to buy Spain’s Puig to create beauty giant
Puig has also been undergoing big changes, recently announcing a new CEO
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[NEW YORK] Estee Lauder said that it’s in talks to buy Puig in a deal that would create a cosmetics giant with about US$20 billion in annual sales.
The companies declined to offer details on the terms. Puig, based in Spain, has a market value of about nine billion euros (S$13 billion).
Investors were not initially pleased, with Estee Lauder’s stock sinking about 8 per cent at the close of New York trading.
Estee Lauder 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.
Puig, which generated about five billion euros in sales last year, has also been undergoing big changes, recently announcing a new CEO. The company has struggled since an initial public offering in 2024, with earnings disappointments weighing on shares.
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Integration risks
Estee 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 Estee 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, which owns many fragrances, is likely a bet on the continuing strength of those items.
A deal would also enable Estee Lauder to compete better against the world’s largest cosmetics company, L’Oreal, which has outperformed Estee 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. BLOOMBERG
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