Charlotte Tilbury contract negotiations may complicate Puig and Estée Lauder merger

Charlotte Tilbury, the owner of her namesake premium beauty brand, wants to renegotiate the terms of her contract with the Spanish fashion and beauty group Puig, possibly complicating the merger of the beauty giant with Estée Lauder.

Puig acquired the Charlotte Tilbury brand in 2020 and now owns 78.5% of the brand. The British beauty brand is linked to Puig until 2031 but now wants to renegotiate her contract, according to Spanish newspaper Expansión, which cites several anonymous market sources.

Charlotte Tilbury owns the remaining 21.5% of her namesake brand, which is the flagship of the group's make-up division.

The current contract includes deferred payments based on the company’s financial performance, known in financial jargon as earn-outs. According to Expansión’s sources, the brand's current business performance would not entitle the founder to receive earn-outs, which is why she wants to renegotiate her contract.

The contract also includes a series of call and put options at a valuation linked to the performance of Charlotte Tilbury’s business, which gives Puig the right to buy more of the company, with expectations that it will own 100% between 2026 and 2031.

Yet, the agreement also includes a clause that would give the founder, Charlotte Tilbury, the right to complete a forced sale of her entire 21.5% stake, which would be triggered if Puig undergoes a merger or ownership change. This could create a financial liability for Puig that would see it having to pay out several hundred million euros, which sources told Expansión Estée Lauder would not be willing to assume.

The 21.5% stake would be valued at roughly €850 million, depending on the company's revenue and EBITDA performance. This calculation is based on the 2024 valuation of the Charlotte Tilbury brand at €4 billion, following the sale of a 5.4% stake in the brand to Puig for €215 million.

The contractual set-up reflects Puig's standard approach to acquisitions, with a similar model used in the takeovers of beauty brands Dr. Barbara Sturm, Byredo and Dries Van Noten. By keeping the founder involved with a minority stake in the company, it ensures they remain committed to the brand's success.

In April, it was reported that Estée Lauder Companies had engaged JPMorgan Chase & Co. to help arrange a financing package of approximately €5 billion to support a potential transaction involving the Spanish beauty group Puig.