What's Happening?
L'Oreal SA has agreed to purchase Kering SA's beauty division for $4.7 billion, marking a significant strategic shift for Kering under its new CEO, Luca de Meo. This transaction includes the sale of the House
of Creed perfume maker and involves collaboration to develop fragrance and beauty products for Kering's brands such as Gucci, Bottega Veneta, and Balenciaga. The move reverses Kering's previous strategy to expand its beauty segment, aligning instead with L'Oreal's expertise in growing beauty licenses. Kering will receive €4 billion in cash and royalties from L'Oreal, with the deal expected to close in the first half of next year.
Why It's Important?
This acquisition is pivotal as it reflects a shift in Kering's business strategy, potentially affecting the luxury market dynamics. By selling its beauty division, Kering aims to reduce its debt and focus on its core fashion brands amid challenges like declining Chinese demand and potential U.S. tariffs. The deal also highlights L'Oreal's strength in the beauty industry, expanding its portfolio with Kering's perfume brands. This strategic move could influence other luxury brands to reconsider their operational strategies in the beauty segment, impacting market competition and consumer choices.
What's Next?
The completion of the deal is anticipated in the first half of next year, with Kering focusing on reducing its debt and operational costs. L'Oreal will gain long-term licenses for Kering's perfume brands, including Gucci, after existing agreements expire. Kering's new CEO, Luca de Meo, is expected to unveil his strategic vision next spring, which may include further restructuring to address the company's financial challenges and market position.
