Madrid-listed shares of Puig Brands SA (PUIG.MC) plunged more than 14% on Friday after the Spanish beauty group and U.S. cosmetics giant Estee Lauder (EL.N) confirmed they had terminated merger talks. The collapse of the deal, which could have formed a new $40 billion global beauty powerhouse, sent shares of Estee Lauder up over 10% in pre-market trading as its investors signaled their approval of the outcome.
"The end of the talks is likely to weigh on Puig shares, with investors' attention returning to operating results as growth in fragrances normalises and pressure persists in the Middle East and travel retail," J.P. Morgan said in a note to clients following the announcement.
The failed negotiations remove a significant potential premium for Puig's valuation, which had been buoyed by the prospect of a tie-up with its larger American rival. Following the termination, Puig's stock fell to its lowest level since its market debut, while Estee Lauder's shares saw a significant boost, suggesting Wall Street viewed the potential merger as a costly and risky venture for the U.S. company. The combination would have created a formidable competitor to industry leader L'Oreal.
For Puig, the development marks a strategic setback. The Barcelona-based firm will now have to continue its growth strategy independently, relying on organic expansion and smaller, selective acquisitions. The company said it "will remain focused on executing its strategy," adding that its capital structure would provide flexibility for future deals. This follows Puig's unsuccessful bid for Kering's luxury beauty unit last year, which was ultimately acquired by L'Oreal for approximately $4.7 billion.
This article is for informational purposes only and does not constitute investment advice.
