L’Oréal purchases Kering’s beauty division for $4.7 billion, and the CEO wants to lower debt

Along with lowering the luxury group’s massive debt and focused on its main fashion business, Kering, the owner of Gucci. Has agreed to sell the cosmetics division to L’Oréal for €4 billion ($4.66 billion). This is a significant change in strategy by new CEO Luca de Meo.

The deal will give French beauty behemoth L’Oréal the exclusive right to create fragrances and cosmetics for 50 years under Kering’s fashion brands. Such as Bottega Veneta and Balenciaga, as well as the Creed fragrance line, which former CEO François-Henri Pinault purchased for €3.5 billion in 2023.

Once a deal with Coty is concluded, which analysts predict would run until 2028, when it expires, L’Oréal will also acquire the Gucci license, likewise for 50 years.

Even more significant than its $2.5 billion acquisition of the Australian brand Aesop in 2023, Kering Beauty will be L’Oréal’s biggest acquisition to date. Analysts at Bernstein pointed out that the transaction makes strategic sense because Creed is one of the most intriguing brands in the expanding premium fragrance market. L’Oréal’s stock increased 1.4%, while Kering’s increased 4.7%.

Investors are worried about Kering’s net debt, which was €9.5 billion at the end of June and included €6 billion in long-term lease obligations. The sale is a big step in that direction.