Estée Lauder's planned combination with Puig unraveled primarily over valuation differences, the cosmetics company's President and CEO said on Tuesday, but he stressed that the company remains open to M&A provided the economics make sense.
Negotiations between the maker of Clinique and M.A.C and Puig, which owns Jean Paul Gaultier, concluded late last month without a deal after the parties failed to settle on acceptable terms. The discussions, which at times were affected by information leaks, disputes among influential family shareholders and specific demands from industry figures including make-up entrepreneur Charlotte Tilbury, ultimately did not produce a transaction, according to five people with direct knowledge of the talks.
Speaking at a Deutsche Bank consumer conference in Paris, Estée Lauder's chief executive, Stephane de La Faverie, said the impasse came down to price. He said the company would not move forward unless growth and profitability targets could be achieved at an appropriate valuation.
"If we cannot reach the growth and the profitability at the right price point, then that is not an option. And this is why, obviously, this deal didn’t go through, because it was not at the right price," he said, while also reiterating that Estée Lauder will continue to examine acquisition opportunities.
The company has announced a substantial restructuring under its "Beauty Reimagined" program. In May, Estée Lauder said it would eliminate between 9,000 and 10,000 roles worldwide as part of an effort to reduce costs and sharpen the business. Management expects the initiative to deliver up to $1.2 billion in annual savings once fully implemented.
While the failed talks remove one path to scale and portfolio expansion, the CEO's remarks signal that Estée Lauder remains willing to pursue transactions that satisfy its financial criteria. The company is now balancing a large cost-cutting program alongside continued scrutiny of potential strategic deals.
Sectors affected: Consumer discretionary - cosmetics and beauty; mergers and acquisitions; labor markets in the retail and consumer goods sectors.