BY EMMANUEL OGBONNA
Shares of Puig plunged on Friday while Estée Lauder surged in U.S. premarket trading after the two beauty giants announced they had ended merger negotiations that could have created a luxury cosmetics powerhouse valued at roughly $40 billion.
The collapse of the talks triggered sharply different reactions from investors on both sides of the Atlantic, reflecting contrasting market expectations about what the proposed deal would have meant for each company’s future growth prospects and operational challenges.
Puig’s stock dropped around 13%, making it one of the worst-performing companies on Europe’s benchmark STOXX Europe 600 and placing the shares on course for their steepest single-day decline since the company’s public market debut in 2024.
The Spanish perfume and fashion group had seen its stock rally significantly after reports of merger discussions with Estée Lauder emerged in March. Friday’s sharp decline effectively erased much of those gains as investors reassessed Puig’s standalone growth outlook following the breakdown of negotiations.
Meanwhile, Estée Lauder shares climbed roughly 10% in premarket trading in the United States as investors welcomed the decision to abandon a transaction that many analysts believed could have complicated the company’s ongoing turnaround efforts.
Wall Street had expressed growing concern in recent months that a merger of such scale could distract management and place additional pressure on Estée Lauder at a time when the company is already undergoing a major restructuring aimed at reviving sales growth and improving profitability.
The reaction highlighted differing investor sentiment toward the two companies. While Puig investors had viewed the proposed merger as a transformational opportunity to create a global luxury beauty leader with expanded scale and international reach, many Estée Lauder shareholders worried the deal could increase operational risks and delay recovery efforts.
Under Chief Executive Stephane de La Faverie, Estée Lauder has been aggressively pursuing a broad turnaround strategy focused on reinvigorating demand across key markets, particularly in China and global travel retail channels that were heavily affected by shifting consumer behavior and economic uncertainty.
The company has accelerated new product launches, expanded luxury pricing strategies and increased marketing investments in an effort to strengthen its position in the highly competitive global beauty sector.
Analysts at bankofamerica.com said the end of the merger discussions should be viewed positively for Estée Lauder because it allows investors to refocus on the company’s operational recovery rather than the complexities of a major acquisition.
The brokerage said investor attention would likely shift back toward improving market conditions in China and travel retail, areas that remain critical to Estée Lauder’s future performance.
The company has also intensified efforts to reduce costs and streamline operations. Earlier this month, Estée Lauder raised its annual profit forecast and announced plans to cut as many as 3,000 additional jobs globally as part of a broader restructuring initiative.
Executives are targeting between $1 billion and $1.2 billion in gross cost-saving benefits by the end of fiscal 2027 as the company works to restore margins and improve efficiency.
For Puig, however, analysts suggested the collapse of the deal could place renewed scrutiny on its slowing growth trajectory, particularly within the fragrance business that had previously been one of the strongest-performing segments in the luxury beauty industry.
Analysts at jpmorgan.com warned that the end of the negotiations may weigh on Puig shares as investors once again focus on the company’s underlying operating performance rather than merger-related optimism.
The brokerage noted that growth in the fragrance sector has begun to normalize after an exceptionally strong period of consumer demand, while ongoing weakness in Middle Eastern markets and travel retail channels continues to create pressure for luxury beauty companies.
Markets are also likely to revisit Puig’s first-quarter trading update released in April, which showed slower sales growth and raised concerns about the sustainability of the company’s recent momentum.
Despite the setback, Puig said it would continue focusing on executing its long-term strategy independently and emphasized that its balance sheet and capital structure remain strong enough to support selective merger and acquisition opportunities in the future.
The company declined to provide additional comments beyond its official statement, while Estée Lauder did not immediately respond to requests for further clarification.
The failed negotiations also leave investors waiting for further details about Puig’s future plans.
The company had originally scheduled a Capital Markets Day event for April 14 but postponed it after merger discussions became public. Investors are now awaiting a new date for the event, where Puig is expected to outline its updated strategic roadmap and long-term financial targets.
The abandoned deal marks another sign of the growing pressure facing global beauty companies as they navigate shifting consumer spending trends, rising competition and uneven recovery patterns across international markets.
Luxury cosmetics and fragrance groups have increasingly explored consolidation opportunities in recent years as companies seek greater scale, stronger pricing power and broader geographic diversification in response to changing market dynamics.
Had the merger succeeded, the combined group would likely have emerged as one of the largest luxury beauty companies in the world, competing more directly with industry giants such as L’Oréal and Shiseido.
Instead, both companies now return to pursuing separate strategies at a time when investors remain highly focused on profitability, operational discipline and the ability to sustain growth in an increasingly uncertain global consumer environment.
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