Kering to sell beauty business to L’Oréal for €4 billion to cut debt

Gucci owner Kering, said on Sunday it has agreed to sell its beauty business to L'Oreal, opens new tab for 4 billion euros ($4.66 billion), in a major shift in strategy by new CEO Luca de Meo as he moves to tackle the luxury group's high debt and refocus on its core fashion business.

Under the deal, French beauty giant L'Oreal will acquire Kering's fragrance line Creed, as well as rights to develop fragrance and beauty products under Kering's fashion labels Gucci, Bottega Veneta and Balenciaga under a 50-year exclusive license.

The licence for Gucci fragrances is currently held by Coty, opens new tab and the new 50-year deal with L'Oreal will commence when that expires, believed by analysts to be in 2028.

The sale is a significant step towards reducing Kering's net debt, which stood at 9.5 billion euros at the end of June, on top of 6 billion euros in long-term lease liabilities, sparking investor concern.

It is also a major shift in direction by De Meo less than two months after taking the helm, as he unwinds one of the biggest strategic pivots made by his predecessor Francois-Henri Pinault, whose family controls the group, in recent years.

Reuters