Kering Sells Beauty Division to L'Oréal for 4.6 Billion Dollars

Kering, the prominent French luxury conglomerate, experienced a significant surge in its share price Monday following the announcement of a monumental deal: the sale of its beauty products division to L'Oréal for a staggering $4.6 billion. The news sent Kering's shares soaring by more than five percent at the opening of Paris trading. This strategic acquisition will not only transfer Kering's existing beauty assets, including its leading perfume brand Creed, to L'Oréal but will also grant the beauty giant 50-year exclusive licenses to develop and distribute products under Kering's prestigious Gucci, Bottega Veneta, and Balenciaga labels. In contrast, L'Oréal's shares saw a modest increase of 0.6%, aligning with the general trend of the Paris CAC 40 index, which rose by 0.5%.

This substantial transaction comes at a critical time for Kering, which has been grappling with financial challenges over the past several years. The luxury group reported a difficult first half of the year, with profits declining by nearly half on the back of a 16% drop in turnover. The proceeds from the sale of its beauty division are earmarked to alleviate a significant debt burden, which currently stands at 9.5 billion euros, equivalent to approximately $11 billion. The market is now keenly awaiting Kering's third-quarter results, scheduled for release on Wednesday, which will offer further insights into the group's current financial health.

The announced sale to L'Oréal is still contingent on obtaining the necessary regulatory approvals. Should the deal proceed as planned, the payment is anticipated to be completed in the first half of 2026. The 50-year exclusive licenses for Kering's flagship brands will commence in 2028, coinciding with the expiration of the group's current licensing agreement with the American company Coty, ensuring a seamless transition of brand management and product development responsibilities to L'Oréal.

Kering's new CEO, Luca de Meo, who assumed leadership just a month ago, has hailed this deal as a "decisive step" for the French luxury group. His immediate priority is to orchestrate a turnaround in Kering's fortunes, which have been significantly impacted by ongoing difficulties at its star brand, Gucci. Gucci alone accounts for a substantial 44% of the group's total turnover and contributes two-thirds of its operating profit, underscoring the critical importance of revitalizing the brand's performance to ensure the overall success and stability of the Kering portfolio.