Shares of Estée Lauder (EL) climbed sharply on Friday after the cosmetics company and Spanish beauty group Puig Brands announced they had terminated merger discussions that could have created one of the world’s largest luxury beauty companies.
Estée Lauder shares rose roughly 11% in premarket trading, putting the stock on track for its strongest single-day performance in nearly a year.
Meanwhile, shares of Puig Brands fell about 13% in European trading, positioning the stock for one of its worst sessions since its 2024 market debut.
The market reaction largely reversed investor moves seen in March when reports first emerged that the companies were exploring a potential tie-up.
At the time, Puig shares rallied on expectations that the deal would significantly expand the company’s scale, while Estée Lauder stock fell as investors raised concerns about dilution risks and the complexity of integrating another large beauty business during an ongoing turnaround effort.
Investors welcome end of merger talks
The two companies confirmed late Thursday that discussions regarding a combination had ended.
The proposed merger would have brought together major global beauty brands, including Puig-owned Charlotte Tilbury, Carolina Herrera, Byredo, and Jean Paul Gaultier, with Estée Lauder’s portfolio, which includes Clinique and Bobbi Brown Cosmetics.
Analysts said investors appeared relieved that Estée Lauder would now remain focused on its existing restructuring and growth strategy rather than pursuing a large-scale acquisition.
“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,” Estée Lauder CEO Stéphane de La Faverie said in a statement.
“At the same time, we 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.”
Bank of America analysts said the collapse of the talks would allow investor attention to return to the company’s operational turnaround.
“Today’s news should be a positive catalyst for the stock, as the equity story pivots back to fundamentals,” the analysts wrote.
Jefferies analysts also described the development as positive for Estée Lauder, arguing that the company had regained greater flexibility around future mergers and acquisitions.
“A merger with the Madrid-listed group wouldn’t have meaningfully diversified Estee Lauder’s business,” Jefferies analysts wrote.
Turnaround efforts remain central focus
Estée Lauder has spent the past several years attempting to revive growth amid slowing demand in China, weakness in travel retail, and changing consumer spending patterns.
CEO Stéphane de La Faverie has focused on accelerating product launches, strengthening luxury offerings, and increasing marketing efforts to improve sales momentum.
Earlier this month, the company raised its annual profit forecast and announced plans to cut up to 3,000 additional jobs globally as part of a broader restructuring initiative.
Bank of America analysts said improving market conditions in China and travel retail would likely become key drivers of investor sentiment going forward.
The analysts also noted that the company remains focused on reducing costs, targeting between $1 billion and $1.2 billion in gross benefits by the end of fiscal 2027.
At the same time, concerns around consumer demand remain in focus, particularly as geopolitical tensions and elevated energy prices continue to pressure discretionary spending.
Puig shares tumble as focus shifts back to growth
For Puig Brands, the end of the negotiations erased much of the optimism that had lifted the stock earlier this year.
The company’s shares surrendered most of the gains recorded after merger discussions became public in March.
J.P. Morgan analysts said investors would now likely refocus on Puig’s underlying business performance as growth in the fragrance market normalizes and challenges persist in the Middle East and travel retail channels.
Markets are also awaiting a new date for Puig’s postponed Capital Markets Day event, along with updated strategic guidance from the company.
Puig said it would remain focused on executing its long-term strategy while maintaining financial flexibility for selective acquisitions in the future.
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