STORY: Estee Lauder and Spanish beauty group Puig said Monday they are discussing a merger.
The deal would create a $40 billion luxury beauty group, and put brands such as Tom Ford, Carolina Herrera and Clinique under one roof.
The deal comes as the global fragrance industry faces a slowdown after years of strong post-pandemic growth.
It could also help drive Estee Lauder's turnaround efforts after the company's annual outlook fell short of Wall Street estimates.
A source familiar with the deal told Reuters that another part of the rationale is that a combined company will better compete with French giant L'Oreal.
But one analyst said it could just "saddle Estée Lauder with more problems."
Puig, home to iconic perfume lines from Jean Paul Gaultier and Byredo, last month reported slowing growth in fragrances.
Shares of Estee Lauder fell sharply on news of the plan, ending Monday's session more than 7% lower.
