Negotiations for Estée Lauder and Puig Merger Break Down

Estée Lauder, a U.S. cosmetics giant, and Spain’s Puig perfume group were on the verge of finalizing a major merger when discussions fell apart late Thursday. This deal aimed to form a monumental $40 billion luxury cosmetics powerhouse.

The proposed merger would have united well-known brands such as Tom Ford, Clinique, and MAC, while also bringing in popular figures like Carolina Herrera and Charlotte Tilbury, who have a strong following, particularly among wealthy millennials and TikTok influencers.

However, the negotiations crumbled due to several factors. Reports of information leaks, friction among influential family members, and specific demands made by Charlotte Tilbury and others were central to the breakdown, as revealed by five sources familiar with the happenings.

One insider noted that Mark Puig had phone conversations with Estée Lauder’s chairman, William Lauder, late Thursday night in Barcelona and early Friday morning in New York to navigate the worsening situation.

Not long after, advisers exchanged messages, leading to a particularly blunt communication that featured a skull emoji, signifying the end of the contract discussions.

Spokespeople for both Puig and Estée Lauder chose not to comment on the situation.

Concerns Over Charlotte Tilbury’s Stake

A significant issue was linked to the minority stake arrangements for Charlotte Tilbury, the founder of her beauty brand, which is primarily owned by Puig, according to the five sources.

Tilbury’s office also declined to provide any remarks on the matter.

Five individuals close to the negotiations, who asked to remain anonymous due to the sensitive nature of the discussions, indicated that the two companies had been eager to announce a merger multiple times.

As part of the proposed deal, Estée Lauder had mobilized a team of advisors to appraise Mr. Puig, a request from Spain’s stock market regulator.

Long Negotiation Process

The discussions began late last year. Once the deal was made public in March, it was clear that investors perceived Puig as a more attractive option for acquisition compared to Estée Lauder. Following the public announcement, Puig’s stock experienced a significant rise, while Estée Lauder’s shares took a hit.

After the breakdown of talks, Estée Lauder’s stock increased by about 10%, in stark contrast to Puig’s 13% fall.

Several sources indicated that dissatisfaction among Estée Lauder investors regarding the merger played a role in stalling the negotiations.

Despite recent success in profit growth, Estée Lauder has gained confidence in remaining independent, according to three sources.

Over the months, negotiations included various meetings across cities like Paris, New York, and Barcelona. An initial agreement was reached on governance structures for the new company.

Discussions also touched on topics like dual listing opportunities in New York and Madrid, the possibility of maintaining Barcelona as the headquarters for the new fragrance division, and how to optimize synergies between the combined companies.

Both founding families, namely Mr. Lauder and Mr. Puig, expressed a desire for continued involvement in the new organization.

Additionally, challenges arose regarding the management of assets, particularly concerning Charlotte Tilbury, which serves as Puig’s primary revenue source, alongside the sun care brand Isdin, in which full ownership isn’t established.