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EL's skin care and fragrance momentum drives growth as the company explores a possible business combination with Puig.

Bank of America highlighted the potential merger between Estee Lauder Companies Inc (NYSE:EL, XETRA:ELAA) and Spanish beauty group Puig as a transformational move that could reshape Estee Lauder's growth story. “A merger with Puig would completely change the Estee Lauder equity story from one which was driven by its Beauty Reimagined turnaround plan to transformational M&A driving more balanced geographic and category exposure at scale,” the bank's analysts wrote in a note.

Shares in Puig Brands have climbed sharply after the group confirmed it is in discussions with Estée Lauder over a potential merger in a deal that could redraw the competitive landscape of the global beauty industry.

Estée Lauder and Puig have confirmed they are in discussions over a potential merger that could create a luxury beauty group with a combined market capitalisation of around $40 billion, bringing together a portfolio of global brands spanning skincare, cosmetics, and fragrances. The companies said on March 23 that talks are ongoing, confirming earlier media reports.

Estee Lauder's potential combination with Puig Brands would put it in a direct fight with sector leader L'Oreal's premium fragrances, but could complicate the ​U.S. company's turnaround plans just as the Iran war clouds the outlook for travel retail.

Estee Lauder Companies Inc (NYSE:EL, XETRA:ELAA) has confirmed it is in discussions regarding a potential business combination with Spanish fashion and beauty company Puig, as the companies explore a possible merger of their operations. In a statement on Monday, Estée Lauder said no final decision has been made, and no agreement has been reached.