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For the past two months, the intense mutual heavy petting between The Estée Lauder Companies and Puig, which would have potentially created the largest prestige beauty conglomerate in the world, was discussed as if the deal were a fait accompli. And yet many of the details hadn’t been ironed out: the acquisition cost, the leadership structure, the complicated interpersonal dynamics between two family-controlled conglomerates, etcetera. Nevertheless, the industry never seemed to contemplate that the merger might not happen. The prevailing notion was that these were sensible and well-capitalized companies whose overlords and management teams would eventually resolve the thorny particulars.

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Then, last week, the Spanish publication Expansión reported that discussions hit a potentially insurmountable roadblock over Charlotte Tilbury, the brand and the person. In short, Tilbury—the founder, president, chairman, chief creative officer, and “sole founder” of Charlotte Tilbury Beauty, according to the brand’s website—was in the midst of a contract renegotiation with Puig, which had acquired a majority stake in her company in 2020. She still owns 20-ish percent of her namesake makeup brand, and the transaction would have triggered a change-in-control clause that would have led to a payout of close to $1 billion. (The brand was most recently valued at $4.6 billion.) This represented an astronomical sum for a founder to make in a second exit. Within two days, both parties confirmed that negotiations had been terminated. E.L.C.’s shares jumped nearly 12 percent on Friday, while Puig’s dropped nearly 13 percent.

Publicly, Lauder’s alleged refusal to pay out Tilbury became the scapegoat. But that’s not the whole story. I heard that a lot of issues came to light during negotiations, from the price to governance to how exactly the new entity would operate. “They were in due diligence, and Lauder had everyone’s contracts,” said a person familiar with the negotiations. “Charlotte’s contract—that she still owned part of her company and that there was a change-in-control clause—was a known fact from the very beginning.” (A spokesperson for Puig declined to comment, and a spokesperson for The Estée Lauder Companies did not respond to a request for comment.)

Anyway, a source with close ties to Lauder said there was also a lot of internal grumbling that the organization would have trouble “absorbing” a merger because “there’s already been so much change too quickly.” A high-level insider also suggested that Puig was dissatisfied with the proposed price, and envisioned enough risks with the combination to curb its enthusiasm. “I believe that both sides wanted to run away from each other the more they got to know each other,” the insider said, perhaps slightly hyperbolically. “I actually think there was more pushback from Puig than Lauder, and Puig thought they were getting a raw deal––but the way it wound up playing out is that E.L.C. refused them.”

Meanwhile, there’s plenty of recrimination-filled chatter that usually accompanies any felled deal. To wit: In March, Spain’s El Confidencial reported that Puig could become the largest shareholder in the business amid a consolidation, and I’ve heard that the Lauder family wasn’t thrilled with their potential dilution. Other sources suggested that the two families may have “become equal financially,” but one Lauder insider said that this structure could have been a challenge for William Lauder, who has controlling voting rights. That said, another high-level source insisted that William was all in. “I know that William Lauder and Stéphane [de La Faverie] wanted it really badly,” this source said.

The implosion of the deal may open the door for Unilever, the C.P.G. giant, to consolidate its dominance in the beauty space. The conglomerate recently sold off its food business to McCormick, has close to $16 billion to spend on M&A, and hasn’t been shy about signaling its deal lust. Herrish Patel, the company’s top North American executive, recently said the company is intent on going “further and wider” in the beauty category, and a number of recent stories have, rather accurately, described Unilever as “beauty’s challenger conglomerate.”

Indeed, according to the person with ties to Lauder, the latest banker gossip is that L’Oréal was never threatened by a potential Puig-Lauder union. Instead, Unilever’s ambitions have been keeping French beauty executives up at night. “L’Oréal didn’t even really care that much about it, but what they’re more threatened by and discussing is Unilever—their divesting and going bigger into beauty,” this person said.

Could Unilever, with its $124 billion market cap, ever acquire $33 billion E.L.C.? That would be a big bite, but I just started hearing murmurs fantasizing about L’Oréal’s next potential move: a possible acquisition of Shiseido, which is currently priced at a more digestible $7.7 billion enterprise value. This hypothetical may merely be inhabiting banker thought bubbles, but you can see the thesis. The beleaguered Japanese beauty conglomerate still owns a handful of strong brands that would certainly benefit from a more stable, well-capitalized parent company. (Spokespeople for L’Oréal and Shiseido did not respond to requests for comment.)

For Lauder to keep pace with the other giants in the space, M&A will be necessary. One possibility is that E.L.C. will off-load Too Faced, which could free up the company to buy a modestly priced brand—which unfortunately won’t be makeup, I’m told, despite the handful of attractive lines in the $300 million–$400 million range. For its part, L’Oréal’s acquisition of Kering Beauté “was really a threat to Puig’s business model,” said a person close to Puig, noting that the Spanish beauty giant may want to make their own move sooner than later. Of course, given that it’s still a fraction of Lauder’s size, Puig will have far more options, and could do deals with the likes of LVMH, Richemont, or Coty, which has a bunch of fragrance assets.

Wow. Three Condé Nast union members who were fired last November after marching up to minor Line Sheet celebrity (and head of human resources) Stan Duncan and peppering him with questions (watch the video here) were reinstated so that they could resign as active employees. They also received a collective settlement worth more than $400,000. (In a note to employees today, the publisher’s human resources team said, in part, “As part of the agreement, both parties expressly denied wrongdoing and liability.”) [The Wrap]

Gucci is sponsoring the Alpine Formula 1 team. Obviously, Luca de Meo used to be the C.E.O. of Alpine. [Motorsport]

Henry Zankov is the new artistic director of Diane Von Furstenberg. [Vogue Business]

There’s rarely a desire to even consider a Pre-Fall campaign, but Julien Dosenna’s latest for Rabanne is interesting. (It was conceived in collaboration with Alexia Niedzielski.) [Rabanne]

Lululemon finally ended its proxy war with Chip Wilson. The founder got two of his board nominees a seat, and he’ll have access to incoming C.E.O. Heidi O’Neill in exchange for keeping his mouth shut for 18 months. [Lululemon]

Abercrombie & Fitch had a strange Q1. It generated its highest sales ever for the quarter at $1.1 billion, beating estimates. But year-over-year growth slowed to 2 percent thanks to the war in Iran, and net profits fell 16 percent. Still, Gen Z’s fave mall brand managed to appease investors by keeping its full-year sales and profit guidance intact. The stock jumped over 10 percent. [Abercrombie & Fitch]

Princess Anne’s sunglasses! [N.Y. Times]

Until tomorrow,
Lauren

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