French luxury company Kering announced on Sunday (October 19) that it will sell its beauty business to L’Oréal for 4 billion euros (approximately 46.6 billion US dollars).
According to the agreement, L’Oréal will acquire Kering’s high-end fragrance brand “Creed” and gain a 50-year exclusive license to develop beauty and fragrance products for Kering’s brands “Gucci”, “Bottega Veneta”, and “Balenciaga”.
This all-cash transaction is expected to be completed in the first half of 2026. L’Oréal will pay royalties for the use of Kering’s licensed brands.
Luca de Meo, CEO of Kering, stated that this transaction will combine L’Oréal’s innovation and expertise with Kering’s influence in the luxury sector and deep understanding of high-end customers. The two parties will establish a strategic committee to coordinate cooperation and expand opportunities in the health and longevity market.
This is not the first collaboration between the two companies. L’Oréal had previously acquired the cosmetics license of Yves Saint Laurent, a brand under Kering, back in 2008.
De Meo commented, “By collaborating with a global leader in beauty, we will accelerate the development of fragrances and cosmetics for our major brands, enabling them to achieve economies of scale in this field and unleash enormous long-term potential, similar to the success achieved by Yves Saint Laurent Beauté under L’Oréal’s management.”
Since acquiring the Yves Saint Laurent brand license for 1.15 billion euros in 2008, L’Oréal has been producing popular perfumes for that brand.
Nicolas Hieronimus, CEO of L’Oréal, highlighted that Creed is one of the fastest-growing brands in the specific high-end fragrance market, while Gucci, Bottega Veneta, and Balenciaga are “outstanding luxury brands with huge growth potential.”
This sale is an important move for Kering to reduce its high debt burden. As of the end of June, Kering had a net debt of 9.5 billion euros and an additional 6 billion euros in long-term lease debt, causing concerns among investors.
Kering has been struggling to reverse the decline in its largest brand, Gucci, with the slowdown in demand in the Chinese market being particularly severe. De Meo completed this transaction less than two months after taking over as CEO and rolled back a series of strategies by the former CEO and controlling family member François-Henri Pinault.
Pinault had established Kering Beauté to manage the group’s brands’ beauty product development, aiming to extend fashion brands into the beauty and fragrance sector to establish new revenue sources in the high-end beauty market and reduce reliance on the main profit source, Gucci.
However, the group encountered difficulties in driving growth in the beauty business, recording an operational loss of 60 million euros in the first half of this year.
Gucci’s revenue plummeted by 25% in the most recent quarter, prompting Kering to accelerate debt reduction efforts to avoid further credit rating downgrades.
De Meo is refocusing Kering’s efforts on its core fashion business.
This acquisition will be L’Oréal’s largest transaction to date, surpassing its record acquisition of Australian brand Aesop for 2.5 billion US dollars in 2023.
In addition, Giorgio Armani Group is in talks with L’Oréal, as the late designer Giorgio Armani designated L’Oréal as a priority candidate to purchase a minority stake in the brand in his will.
(Reference: Associated Press and Reuters)