Dive Brief:
- Beauty giant Estée Lauder and Spanish beauty conglomerate Puig have called off their merger talks, the companies said Thursday.
- In March, the companies said they were discussing potentially combining their businesses, which would create an enterprise valued at more than $40 billion according to some estimates.
- Estée Lauder in a press release said it is focusing on its turnaround, “which is well underway and delivering positive results.” Puig didn’t immediately respond to an inquiry about possible next steps.
Dive Insight:
The prospect of this combination got tepid reviews by analysts, who by and large wondered what the point would be, at least for Estée Lauder.
A major concern was the interruption of that company’s efforts to overhaul its business, a project dubbed Beauty Reimagined. In its most recent fiscal year, Estée Lauder net sales fell 8% year on year to $14.3 billion.
Wells Fargo analysts led by Chris Carey reaffirmed that in a research note Thursday.
“While a deal looked accretive on paper, it also added complexity at a time when EL needs to build confidence on a fundamental turn,” they said.
Estée Lauder CEO Stéphane de La Faverie addressed that in a statement Thursday.
“Today, we are reiterating our confidence in the power of our incredible brands, our talented teams, and our strength as a standalone company,” he said. “We are more optimistic than ever about our ability to unlock significant long-term value through Beauty Reimagined, and we remain focused on accelerating that progress.”
In addition to its namesake brand, Estée Lauder’s stable includes Clinique, MAC, La Mer, Bobbi Brown Cosmetics, Aveda, Jo Malone London, Bumble and Bumble, Tom Ford, Le Labo, Too Faced and Deciem brands, among others.
The merger would have diversified both companies to some extent. Puig’s portfolio includes, in addition to its own brands, Rabanne, Charlotte Tilbury, Jean Paul Gaultier, Nina Ricci, Dries Van Noten, Penhaligon’s and more, plus licenses for beauty brands including Christian Louboutin. Last year, the company reported net revenue growth of nearly 5%, topping 5 billion euros (nearly $6 billion at press time).
Still, Estée Lauder seemed to leave the door open to other deals, saying it “will continue to evaluate and evolve our portfolio to ensure we have the right assets to drive the most compelling growth opportunities, including both potential acquisitions and divestitures.” Wells Fargo speculated that could mean smaller acquisitions to build the core business.
Puig’s stake in Charlotte Tilbury may have complicated the companies’ discussions, according to several media outlets. Tilbury is reportedly exploring a sale of her minority stake in the business. Neither Estée Lauder nor Puig have immediately replied to questions about whether this was a factor in talks ending. The beauty brand didn't immediately respond to an inquiry about whether Tilbury is looking to sell a stake.
