UPDATE 2-Puig dips, Estée Lauder surges after merger talks collapse

Puig's shares were at the bottom of Europe's benchmark STOXX 600 index and looked to ‌be on track for the worst trading day since their 2024 listing, if the losses hold, after the companies scrapped a merger plan that would have created a luxury beauty group worth about $40 billion. The perfumer's shares, which had rallied when the talks became public in March, surrendered most ‌of those gains on Friday.

Puig's shares fell ​about 13% while Estée Lauder rose roughly 10% ‌in ​U.S. premarket trading after the Spanish perfumer and the American cosmetics company announced the end of merger talks. Puig's shares were at the bottom of Europe's benchmark STOXX 600 index and looked to ‌be on track for the worst trading day since their 2024 listing, if the losses hold, after the companies scrapped a merger plan that would have created a luxury beauty group worth about $40 billion.

The perfumer's shares, which had rallied when the talks became public in March, surrendered most ‌of those gains on Friday. Estée Lauder's shares, by contrast, had declined on news of a potential deal as Wall Street raised ‌concerns that a merger could add to the company's challenges amid its turnaround efforts.

TURNAROUND BACK IN FOCUS CEO Stephane de La Faverie has pushed to ramp up product launches, add luxury price tiers and boost marketing in a bid to revive demand across Estée Lauder's main markets.

"(The end of merger talks) news should be a positive catalyst ⁠for ​the stock, as the equity story ⁠pivots back to fundamentals driven by an improving beauty market backdrop in China and Travel Retail," BofA analysts said in a note. This would now help Estée remain ⁠squarely focused on removing excess costs, targeting $1 billion to $1.2 billion in gross benefits by the end of fiscal 2027, they said.

The company also raised its ​annual profit forecast earlier this month and outlined plans to cut up to 3,000 more jobs globally in a broader restructuring ⁠push. For Puig, J.P.Morgan said the talks ending could likely weigh on shares, with investors' attention returning to operating results as growth in fragrances normalizes and pressure on the Middle ⁠East ​and travel retail persists.

Markets can now focus more closely on the slower sales growth shown in Puig's first-quarter update in April, the brokerage said in a note to clients. Puig will stay focused on executing its strategy, it said in Thursday's statement, adding that ⁠its capital structure would give it flexibility for selective mergers and acquisitions.

Puig declined to comment further when contacted by Reuters and Estée Lauder ⁠did not immediately respond to ⁠a request for comment. Puig was scheduled to hold its Capital Markets Day on April 14, but postponed the event due to the negotiations. A fresh date for the event and the company's new strategic ‌plan are now awaited.