The "merger of the century" fell through, and Estée Lauder breathed a sigh of relief.

The merger deal between the world's fourth and ninth most valuable cosmetics companies has fallen through.

On May 21, Estée Lauder, a leading American luxury beauty giant, and Puig, a Spanish perfume and beauty group, jointly announced that they had officially terminated the negotiations on a potential merger, and no agreement was reached. Estée Lauder's after - hours share price immediately jumped more than 10% to $86.9, while Puig's share price tumbled more than 14% on the Madrid market.

There are different opinions in the outside world about the trigger for the deal's collapse. Reuters quoted two people familiar with the matter as saying that the eponymous founder of Puig's British makeup brand Charlotte Tilbury put forward a series of demands related to the repurchase of her own shares during the negotiation process, which significantly increased the complexity of the deal's progress financially. It is reported that Charlotte Tilbury currently still holds about 21.5% of the brand's shares, and Puig expects to gradually complete the full acquisition through a series of option agreements tied to the brand's performance between 2026 and 2031. This unsolved mystery directly disrupted the rhythm of the merger negotiation.

However, an exclusive source from 36Kr pointed out that the crux of the problem goes far beyond this: The fundamental disagreement between the founding families of the two groups on the ownership of the company's control after the merger is the core reason for the ultimate breakdown of the negotiation.

The person familiar with the matter said that Jane Lauder, the third - generation founder of the Estée Lauder Group, has seen a rapid increase in her say within the family in recent years, and she is the opponent of the deal within the family. Jane Lauder's father, Ronald Lauder, the son of the founder, also opposes the merger stance supported by his nephew, William Lauder. Although the Lauder family has withdrawn from the company's daily management, it still holds 82% of the company's voting rights.

On Puig's side, the situation is also complex. Marc Puig, the former CEO who single - handedly pushed Puig Group to complete the largest IPO in Spain in a decade in 2024, is the strong proponent of this deal. However, Manuel Puig Rocha, the vice - chairman and the largest individual shareholder of the group and Marc Puig's cousin, opposes this acquisition. BeautyMatter once quoted a person familiar with the matter as saying that the long - standing rift between the two is the biggest obstacle to the implementation of any agreement.

According to 36Kr, the contact with the intention of a deal between the two can be traced back to 2025. One view is that the very close personal relationship between the executives of the two sides is an important reason for the progress of this deal.

Fabrizio Freda, the first externally hired CEO of Estée Lauder, stepped down last year after leading Estée Lauder for 15 years and still serves as an advisor. He has known Marc Puig for many years, and they are close friends. This connection can even be traced back to an earlier generation: Leonard Lauder, who served as the CEO of Estée Lauder for a long time and led the company's early expansion, and Mariano Puig, the long - time leader of Puig Group, maintained a decades - long mutual admiration before Mariano Puig's death in 2021.

Ten years ago, at a conference on family businesses held at the IESE Business School in Barcelona, Mariano Puig and Fabrizio Freda attended together to discuss the advantages and contradictions of family - controlled enterprises.

"I personally believe that the core of a family business lies in competing in a different way - focusing more on long - term development, being committed to the progress of the industry, and seeking the well - being of all stakeholders," Fabrizio Freda told the media. "It's neither about external management nor about the family: it's about both, and it's their synergy that creates this magic."

In addition, another important reason why the negotiation might have continued is that they have a common enemy - L'Oréal.

The love - hate relationship between Estée Lauder and L'Oréal needs no elaboration. The conflict between Puig and L'Oréal in regional markets and strong product categories is also intensifying. In 2018 and 2019, after L'Oréal successively won the key perfume licenses of Valentino and Prada, the competition further intensified, forcing Puig to re - examine its business model. This Spanish group then shifted from license operation to building its own brand portfolio, acquiring the makeup brand Charlotte Tilbury and the perfume brand Byredo. The latter was won by Puig in a bidding, while L'Oréal lost in the end.

On the night when the news of the merger termination was announced, Estée Lauder's after - hours share price closed at $86.9, up 10.13%. Its latest market value is $28.455 billion, with a cumulative increase of 23.96% in the past 12 months. Nik Modi, an analyst at RBC, said bluntly: "We are relieved to hear the news of the negotiation termination - the integration risk would have put a long - term pressure on the share price." Stéphane de La Faverie, the CEO of Estée Lauder, said in a statement that the company will "fully focus on sustainable sales growth and long - term profitability improvement."

A person familiar with the listing also confirmed to us the company's positive attitude towards the deal's termination.

The market has always been cautious about the story of "weak companies banding together" in the fashion industry. In 2021, there were rumors of a merger between Tapestry and Capri, two leading American luxury brands, but the deal was ultimately stranded due to regulatory obstacles. Now, Tapestry has made a remarkable comeback with Coach, while Capri has been sluggish. This may indicate that even when facing similar market pressures, the brand genes of fashion and beauty groups are very different, and any variables in merger and integration are far more profound than what the financial statements show.

Here is the main timeline of the contact between the two sides -

On March 23 this year, the Financial Times and the Wall Street Journal first reported the rumors, and Estée Lauder issued an announcement on the same day to confirm that the consultations were true. On April 1, Bloomberg reported that the deal would be structured mainly through a stock swap. The investment bank Jefferies then refined the plan into a "20% cash + 80% stock" mixed offer. After the merger, the Lauder family would hold 26.7%, the Puig family 21.7%, existing Estée Lauder shareholders 43.6%, and Puig's minority shareholders 8%.

On April 21, there was a major breakthrough in the negotiation. Reuters quoted a report from the Spanish newspaper Expansión that JP Morgan had designed a financing plan of about 5 billion euros for Estée Lauder and was actively soliciting lenders - this was the clearest signal that the negotiation had entered the substantive stage. On April 30, Reuters reported again that Estée Lauder was considering an offer to acquire Puig's Class B shares at 18 to 19 euros per share. One month later, the negotiation was announced to be terminated.