Estée Lauder and Puig discuss merger as fragrance race drives industry investment

The Estée Lauder Companies (ELC) has confirmed that it is in talks with Spanish beauty group Puig about a potential business merger that would bring major fragrance and beauty brands, including Tom Ford, Rabanne, and Clinique, under one company. 

The potential deal could create a luxury beauty group valued at around US$40 billion, and may strengthen both companies’ position in the global fragrance market, which has seen heightened investment from global giants such as L’Oréal.

ELC stresses that there is no certainty that a deal will happen or what its final terms would be. “No final decision has been made, and no agreement has been reached,” a company statement reads.

However uncertain, news of the potential merger has caused investor concern, as ELC’s shares fell over 7% on the New York Stock Exchange after the announcement.

Scent of a merger

According to analysts, the potential merger could help ELC compete more effectively with giants such as L’Oréal.

The French beauty player last year acquired Kering’s beauty arm for €4 billion (US$4.66 billion), awarding it 50-year exclusive licenses to develop and distribute fragrance and beauty lines for Gucci, Bottega Veneta, and Balenciaga once the existing contracts expire.

Shortly after its beauty division took on new ownership, Kering reported a 13% revenue decline in 2025, citing setbacks from Gucci and Yves Saint Laurent.

If ELC and Puig were to follow through with their potential merger, the combined group could expand ELC’s fragrance portfolio, leveling out the playing field with L’Oréal and LVMH in the luxury scent category.

However, at the same time, experts warn that a deal this large could prove challenging for ELC, as the company is already eyeing updated business strategies amid financial blows.

The company’s Profit Recovery and Growth Plan aims to help alleviate the US$1.13 billion loss it reported for fiscal 2025 — a loss that ELC anticipates may escalate through 2026.

However, as part of the growth plan, the business took on a restructuring process it estimated would cost around US$500–700 million, but by last December, ELC had spent US$1.14 billion on job cuts, contract terminations, and outsourced tech.

Puig owns fragrance brands including Rabanne, Carolina Herrera, and Jean Paul Gaultier.Prior to announcing the billion-dollar shuffle, ELC reported that fragrance was its only growing division, and the company highlighted the Jo Malone London brand as a key growth lever. It then announced doubling down on its commitment to the British fragrance name by introducing a tech scheme aiming to improve its online conversion rates.

Financial notes

The talks come as the personal care industry sees a steady demand for fragrance. The category enjoyed several years of strong growth following the pandemic, cooled thereafter, and is now a category at the front of mind for multiple beauty players.

ELC reported that its fragrance sales rose 9% in its most recent quarterly results. Meanwhile, Puig reported €3.596 billion (US$4.14 billion) in net revenue for 2025 Q3, to which the company’s Fragrance and Fashion segment contributed 73% of total revenue.

Earlier this year, ingredient suppliers Givaudan, Croda, Symrise, and dsm-firmenich each reported strong performance and growth of their respective fragrance segments.

Last November, ELC took a minority stake in Mexican fragrance brand Xinú, and in the same month, L’Oréal poured €60 million (US$69.13 million) into its luxury fragrance production site in France to boost output.

The moves underscore intensifying competition among major beauty companies to strengthen their fragrance portfolios, with the potential Puig merger marking the latest development in the race.