What happened?
Puig and the Estée Lauder Companies (ELC) surprised the beauty industry after the market closed on Monday announcing they are in discussion regarding a potential merger. In a release, the Spanish conglomerate said that no final decision has been made and no agreement has been reached. “Unless and until an agreement is reached, there can be no assurances regarding the deal or the terms,” the statement read.
If the merger is successful, the two cosmetic giants will be worth a combined $40 billion. Following the announcement, ELC’s shares fell 7.7% on Monday, while Puig’s shares rose by 11%. The two companies generated sales of $20 billion between them in fiscal 2025 — ELC revenues dropped 8% to $14.3 billion, while Puig revenues rose 7.8% to €5 billion.
ELC, which is based in New York, is home to a stable of makeup, skincare and fragrance brands including La Mer, Mac Cosmetics, Bobbi Brown, The Ordinary, Le Labo, and Tom Ford’s fashion and beauty arm, among others. Similarly, Spain-based Puig’s portfolio includes fashion and beauty, ranging from Dries Van Noten, Jean Paul Gaultier, and Rabanne to Charlotte Tilbury, Dr. Barbara Sturm, and Byredo.
The sails have been changing at both companies. Last week, Puig named Jose Manuel Albesa as chief executive officer, working alongside Marc Puig, who is stepping away from his current role of chair and CEO of the company and into the position of executive chair.
At ELC, CEO and president Stéphane de La Faverie joined in January 2025 to lead turnaround efforts after difficulties in China and the travel retail market took a toll on sales for the beauty conglomerate. In the second quarter of fiscal 2026, ended December 31, 2025, ELC’s organic net sales rose 4% to $4.16 billion. “We delivered excellent second-quarter results to solidify a strong first half of fiscal 2026. In this pivotal year, [ELC’s transformation plan] Beauty Reimagined has invigorated our business, as we execute the biggest operational, leadership, and cultural transformation in our history,” de La Faverie told analysts during the earnings call.
Why it matters
The merging of ELC and Puig could potentially be the start of a new powerhouse beauty group, one to rival L’Oreal Group, Unilever, and Shiseido.
Ilya Seglin, managing director of investment bank Cascadia Capital, points out that ELC had ground to make up in the prestige beauty market, after Kering announced it was selling Kering Beauté to L’Oreal Group for €4 billion in October 2025. “[Merging ELC] with Puig addresses that somewhat, especially in the fragrance category. Beyond that, these two companies are probably culturally aligned, given the significant family ownership at both,” he says.
In a competitive beauty market, companies are starting to think outside the box in order to secure their futures. “Companies are looking to do corporate deals to enhance their growth stories for investors. This is especially true from ELC’s point of view as, despite the turnaround, it is still seen as an underperformer in need of revitalization,” says Neil Saunders, managing director for retail at Globaldata.
Puig, meanwhile, has seen steady growth. During its second-quarter results, the company said that fragrance and fashion revenues increased by 6.4% on a like-for-like basis, referencing fragrance brands Carolina Herrera and Jean Paul Gaultier as standout performers, while Byredo saw double-digit growth in the niche fragrance category. The group told analysts that brands Rabanne, Carolina Herrera, and Jean Paul Gaultier continue to hold three of the top 10 positions in the global fragrance market.
In comparison, ELC said skincare and fragrance saw the biggest sales growth, up 6% to $2 billion, thanks to La Mer, Tom Ford, and Le Labo. But there’s still much work to be done. “There is a lot of newness in beauty and consumers are receptive to it. Some of the older brands feel tired. A merger doesn’t solve this, but it gives Estée a growth story,” says Saunders.
The merger could allow ELC to strengthen its licensed fragrances arm, something that Puig has succeeded at with Carolina Herrera. “It’s a strategy that ELC has deprioritized over time,” says Marissa Lepor, managing director at investment bank and M&A firm The Sage Group.
According to reports, ELC has been contemplating the future of Dr. Jart+, Too Faced, and Smashbox. With Puig’s help, this could be an opportunity for new life for the respective brands. “The lesson Puig can teach ELC is how to develop brands in a focused way so that they produce growth. Puig has a tight portfolio and has been very good at ensuring its brands remain relevant to consumers through things like marketing and innovation,” says Saunders. “ELC can teach Puig lessons in things like channel distribution and scale.”
ELC selling off some of its brands is still a viable option, because it would raise money for the company and allow the group to simplify operations. “ELC’s portfolio still needs a clean out. And if they merged and came to a deal it makes a lot of sense to reallocate the brands to whichever company is strongest to take them forward,” says Saunders. Seglin contends that it’s too early for the two giants to think about divestitures. “First and foremost, they will need to figure out how to leverage combined scale to grow faster globally,” he added.
M&A activity across the two businesses could accelerate in the near term, Lepor says. “Aside from a few acquisitions, ELC has been more inward focused in recent years, while Puig has made some pivotal acquisitions prior to its IPO in 2024,” she adds.
Puig is in the midst of reorganizing Dr. Barbara Sturm, the German skincare brand it acquired in January 2024 for an undisclosed sum. “When we buy or partner with a brand like this one, it takes time to bring it to the level that we think it should be,” Puig told analysts during the group’s 2025 full-year earnings in February, responding to a question about the brand’s future.
Growth on the horizon
The merger between Puig and ELC could present new growth opportunities. De La Faverie and Albesa are somewhat new in their CEO positions, but have held various senior leadership roles across their respective companies spanning brand development, marketing, and operations. An area they could target together is the emerging markets, especially India. In March, ELC took full ownership of ayurvedic-led beauty brand Forest Essentials, while in 2019, Puig took a minority stake in Kama Ayurveda, the Indian ayurvedic beauty and wellness player.
A recurring theme across recent industry earnings has been the continued resilience and strength of the US consumer. It’s a market in which Puig has found success for fiscal 2025: the company’s Americas sales grew 7.7%, while ELC delivered an incremental 1% sales growth in the Americas during 2026.
Even though ELC had the smallest market share growth in the North American market, the group is finally recovering after a decade of decline. “We came out of 10 years of market share loss in the Americas, and I’m really proud of the momentum that the team have put into this market, because when you look at the 2025 calendar, we’ve been able to gain share in volume,” de La Faverie told analysts. “We are seeing great momentum and we are moving in the right direction when it comes to North America. Overall, I want to say, I feel very strong. I do believe we will see additional momentum going forward into the market.”
For Puig, its executive chair told analysts that the company strengthened its distribution footprint with Amazon in the US. The Americas represent 35% of the group’s revenue.
It’s still early days to predict the future of a potential merger between Puig and ELC, but a shake-up would be sure to send ripples throughout the beauty industry. “We don’t know the full shape of this year. If this is a classic merger, then it will be a deep integration of the businesses across all operational aspects. That will take many years to accomplish, but it may generate some economies of scale,” says Saunders.
