Kering buys time for Gucci’s revival with beauty unit sale

BEAUTY is in the eye of the beholder. But it’s not hard to see why Kering’s new chief executive officer, Luca de Meo, would want to sell the company’s embryonic beauty division, and why L’Oreal would pay 4 billion euros (S$6.03 billion) for it.

For De Meo, the sale shores up Kering’s finances and provides some breathing room until he can get Gucci, his biggest brand, firing on all cylinders. L’Oreal is shelling out a very pretty price for the business, including upmarket perfumier Creed and Gucci’s beauty licence, but it gets the upside that he is prepared to sacrifice.

De Meo, who became CEO last month, inherited a balance sheet stretched to 9.5 billion euros of net debt by deals, including Creed and a minority stake in Valentino, as his predecessor, chairman Francois-Henri Pinault, sought to make Kering less dependent on Gucci.