Kering clinches €4B deal to sell beauty division to L’Oreal

[Berlin, Germany 15 February 2018: French company and leader of world market of perfumery and cosmetics. Office of company or corporation and world business and trade.]
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Gucci owner Kering (OTCPK:PPRUF [https://seekingalpha.com/symbol/PPRUF]) (OTCPK:PPRUY [https://seekingalpha.com/symbol/PPRUY]) said Sunday it agreed to sell [https://seekingalpha.com/pr/20271076-kering-sells-beauty-division-to-loreal-and-says-the-companies-will-collaborate-on-wellness] its beauty business to L'Oreal (OTCPK:LRLCF [https://seekingalpha.com/symbol/LRLCF]) (OTCPK:LRLCY [https://seekingalpha.com/symbol/LRLCY]) for €4 billion (~$4.66 billion), confirming earlier speculation [https://seekingalpha.com/news/4505432-kering-nearing-deal-sell-beauty-unit-loreal], in a deal that marks Kering CEO Luca de Meo's first major move to cut debt and refocus on the core fashion business.

Under the deal terms, L’Oreal (OTCPK:LRLCF [https://seekingalpha.com/symbol/LRLCF]) (LRL CY) will acquire Kering's (OTCPK:PPRUF [https://seekingalpha.com/symbol/PPRUF]) (OTCPK:PPRUY [https://seekingalpha.com/symbol/PPRUY]) Creed fragrance line and rights to create beauty and fragrance products for Kering fashion brands Gucci, Bottega Veneta and Balenciaga under a 50-year exclusive license; the licence for Gucci fragrances is held by Coty (COTY [https://seekingalpha.com/symbol/COTY]), with the new deal beginning when the current license expires, which analysts believe will occur in 2028 [https://www.reuters.com/business/kering-sell-beauty-unit-loreal-466-billion-2025-10-19/].

The companies also said they will explore joint business opportunities in the wellness and longevity market.

The sale is seen as a major step towards reducing Kering's (OTCPK:PPRUF [https://seekingalpha.com/symbol/PPRUF]) (OTCPK:PPRUY [https://seekingalpha.com/symbol/PPRUY]) net debt, which totaled €9.5 billion at the end of June, in addition to €6 billion in long-term lease liabilities.

"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," de Meo said.

MORE ON KERING AND L'ORÉAL

* Kering Shareholder/Analyst Call - Slideshow [https://seekingalpha.com/article/4821826-kering-sa-ppruy-shareholder-analyst-call-slideshow]
* Kering: Luxury Bloodbath Continues [https://seekingalpha.com/article/4808311-kering-luxury-bloodbath-continues]
* L’Oréal: Clinging To Positives Amid Ongoing Consumer Weakness (Downgrade) [https://seekingalpha.com/article/4821634-loreal-clinging-to-positives-amid-ongoing-consumer-weakness-downgrade]