The Estée Lauder Companies is in talks with Spanish beauty group Puig regarding a potential merger of their businesses.

Both companies confirmed they were in discussions, but added that no final decision has been made.

“Unless and until an agreement is signed between the companies, there can be no assurances regarding the deal or its terms,” they said in a statement.

According to Reuters, the deal would create a $40 billion luxury beauty group, and give the companies a strategic position in the global fragrance industry.

Part of the rationale behind the potential merger is that a combined company will better compete with L’Oreal, a source ​familiar with the deal said.

Founded in 1914 and headquartered in Barcelona, Puig operates fragrances, fashion, makeup and skincare business segments. Its portfolio includes Rabanne, Carolina Herrera, Charlotte Tilbury, Jean Paul Gaultier, Nina Ricci, Dries Van Noten and Byredo, as well as licenses of Christian Louboutin, Banderas and Adolfo Dominguez.

Puig sells its products in more than 150 countries and has offices in 33 of them. Last year, the company recorded net revenues of €5 billion ($5.8 billion). 

The Estée Lauder Companies owns brands such as Estée Lauder, La Mer, Bobbi Brown and Le Labo. The beauty retailer reported an 8 per cent decline in sales to $14.3 billion and a net loss of $1.1 billion in FY25.

The company, however, has made early progress in its turnaround strategy, recording a 4 per cent increase in organic sales in the second quarter of the current fiscal year.