“Merger Talks Shock” Estee Lauder Stock (EL) Drops after Confirming Talks with Rabanne-Owner Puig

Estee Lauder EL -7.72% ▼ shares slipped about 8% on Monday after the beauty giant confirmed it is in discussions about a potential merger with Spanish fragrance powerhouse Puig Brands SA. The company said the talks are ongoing and no final decision has been made.

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Puig, the Barcelona‑based owner of brands such as Carolina Herrera, Jean Paul Gaultier, and Rabanne, has been one of the strongest performers in the global beauty sector. The company recently posted double‑digit sales growth and continues to gain market share.

A deal between the two companies would mark one of the major moves in the beauty industry in recent years. The combined global beauty giant is expected to have a market capitalization of nearly $40 billion and annual sales near $20 billion.

Deal Talks Raise Questions amid Ongoing Turnaround

The news comes at a time when Estee Lauder is undergoing a multiyear turnaround amid soft demand in key markets like China and ongoing portfolio restructuring. The turnaround plan, known as the Profit Recovery and Growth Plan (PRGP), was initiated in November 2023 to combat weak sales in China and the duty-free retail. Last year, the company announced plans to cut 5,800 to 7,000 jobs, or up to 11% of its workforce.

Investors appear cautious about the prospect of a major acquisition while the company is still stabilizing its core business.

Is EL a Buy, Hold, or Sell?

On Wall Street, Estee Lauder has a Moderate Buy consensus rating based on nine Buys and 12 Holds issued over the past three months. The average EL stock price target of $112.81 implies over 42% upside.

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