BY Richard Summerfield
Luxury products brand Kering has agreed to sell its beauty division to L’Oréal in a deal worth $4.7bn. The sale comes as Luca de Meo, Kering’s new chief executive, attempts to tackle the company’s high debt load and refocus on core fashion business.
Under the terms of the deal between Kering and L’Oréal, which the companies have called a “long-term strategic partnership in luxury beauty and wellness”, L’Oréal will acquire the House of Creed and the beauty and fragrance licences of iconic Houses of Kering, and the companies will create an exclusive venture to explore business opportunities in the field of wellness and longevity.
The agreement includes the rights to enter into a 50-year exclusive licence for the creation, development and distribution of fragrance and beauty products for Gucci, commencing after expiration of the current licence with Coty, and respecting Kering’s obligations as per the existing licence agreement.
Kering will also grant L’Oréal 50-year exclusive licences for the creation, development and distribution of fragrance and beauty products for Bottega Veneta and Balenciaga, starting upon closing of the announced transaction. L’Oréal will also pay royalties to Kering for the use of its licensed brands.
“This strategic alliance marks a decisive step for Kering,” said Mr de Meo. “Joining forces with the global leader in beauty, we will accelerate the development of fragrance and cosmetics for our major Houses, allowing them to achieve scale in this category and unlock their immense long-term potential, as did Yves Saint Laurent Beauté under L’Oréal’s stewardship. Together, we will also venture into new frontiers of wellness, combining the unrivalled expertise of L’Oréal with our unique luxury reach. This partnership allows us to focus on what defines us best: the creative power and desirability of our Houses.”
“I am delighted to forge this long-term strategic alliance with one of the world’s most prestigious, creative and visionary luxury groups,” said Nicolas Hieronimus, chief executive of L’Oréal Groupe. “This partnership will further solidify our position as the world’s #1 luxury beauty company and allow us to explore new avenues in wellness together. The addition of these extraordinary brands perfectly complements our existing portfolio and significantly expands our reach into new, dynamic segments of luxury beauty. Through Creed, we will establish ourselves as one of the leading players in the fast-growing niche fragrance market. Gucci, Bottega Veneta and Balenciaga are all exceptional couture brands with enormous potential for growth.”
Kering beauty will be L’Oreal’s largest acquisition to date, bigger than its purchase of Australian brand Aesop for $2.5bn in 2023.
The sale is a significant step toward reducing Kering’s net debt, which stood at €9.5bn at the end of June, on top of €6bn in long-term lease liabilities, which have sparked investor concern. Under Mr de Meo, Kering intends to make a number of large-scale changes, after moving to seal the deal with L’Oréal “as quickly as possible” and promising that “you’ll see others”.
News: Kering sells beauty unit to L'Oreal for $4.7 billion as de Meo trims debt