Families that control Puig and Estée Lauder are weighing a set of options intended to rebalance their relative ownership positions in the event the two firms merge, according to people briefed on the discussions. The stated objective of the moves under consideration is to raise Puig's influence within the ownership and voting structure of any combined entity.
One specific proposal being reviewed would see Estée Lauder issue new Class B shares that carry 10 voting rights each - compared with one voting right for Class A shares - and exchange those new Class B shares for Class A shares currently held by the Puig family. Under the present arrangements detailed in the discussions, Puig's Class A shares have five voting rights, while Puig's Class B shares carry one voting right.
That swap would have the effect of narrowing the difference between the Estée Lauder family's stake and the potential stake the Puig family could hold after a merger, as participants in the talks have described it. The mechanics would depend on the final design of any share reallocation and the relative weight assigned to each class in the merged capital structure.
In addition to the share-exchange concept, negotiators are exploring other structural alternatives. These include creating new classes of stock tailored to adjust voting or economic rights, or arranging an asymmetric dividend payment aimed at bringing the two families' holdings closer in value or economic exposure.
Supporters of the asymmetric-dividend approach note it could exploit a material difference between the two groups' balance sheets - specifically Puig's substantially lower debt levels compared with Estée Lauder. That imbalance in leverage is cited as a factor that could make an unequal cash distribution feasible without imposing the same constraints on the more indebted side.
All of the options described are under consideration as part of broader discussions about how to structure ownership and control in the event of a transaction between the two beauty companies. No finalized decisions or agreements have been detailed in the information provided.
Clear summary
The Puig and Estée Lauder families are exploring multiple mechanisms - including issuing and exchanging different share classes, creating new share types, or paying asymmetric dividends - to reduce the ownership gap and increase Puig's influence should the two companies combine.
Key points
- Families controlling Puig and Estée Lauder are examining ways to balance ownership stakes in a possible merged company.
- One contemplated route is Estée Lauder issuing new Class B shares with 10 voting rights and swapping them for Puig-held Class A shares; Puig's Class A currently have five voting rights, while Puig's Class B have one voting right.
- Alternatives being considered include new share classes or an asymmetric dividend, with the latter relying in part on Puig's much lower debt levels versus Estée Lauder.
Risks and uncertainties
- Negotiations may not produce agreement on a share-class restructuring - outcome depends on both families' willingness to accept proposed voting changes, affecting governance of a potential merged company.
- Designing and implementing new share classes or asymmetric payouts introduces legal and execution complexity for the corporate and capital-structure teams involved.
- The effectiveness of an asymmetric dividend as a balancing tool is contingent on the relative debt positions of the two groups and how that influences financing flexibility and shareholder treatment.