Puig fails to meet targets and delays the purchase of Charlotte Tilbury

Business

Puig logo. Credits: Courtesy of Puig

Is Puig failing to meet the objectives it set for its IPO? It seems that, at this moment, this could be the case. The Spanish multinational fashion and beauty company announced it was delaying its acquisition of a minority stake in the cosmetics firm, Charlotte Tilbury, which is to remain in the hands of its founder until 2031. This new deadline for Puig's takeover was decided upon by both parties, and comes after the Spanish firm promised to use a large part of the proceeds from its IPO to purchase the British brand.

Puig first announced its intention to snap up a stake in Charlotte Tilbury back in mid-2020, yet while an exact percentage or value was not disclosed at the time, the company seemingly took control of the firm, strengthening its position in the makeup sector and bringing Charlotte Tilbury under its operational wing. It was later revealed that Puig had in fact acquired a 73.1 percent stake for an amount worth 1.1 billion euros, leaving the brand's eponymous founder as a minority shareholder, with almost the entire remaining capital.

The two parties had agreed on difference purchase options that Puig could use to increase its stake, however, giving it the opportunity to, in the future, reach 100 percent ownership, with a 2025 deadline reportedly being set, according to the economic platform Cinco Días. It was under these options that Puig proceeded to acquire an additional 5.4 percent stake on July 25, 2024, for an amount of 214.8 million euros, bringing its stake in Charlotte Tilbury to 78.5 percent.

The move reflected one of Puig's main objectives for its IPO, launched in May 2024: to use "the net proceeds from the fundraising for general corporate purposes such as the refinancing of the acquisitions of additional stakes in Byredo and Charlotte Tilbury, and supporting the growth strategy of the Company's portfolio and brands". Puig therefore had taken decisive steps forward with its additional acquisition at a time when the company still enjoyed the approval of markets and investors. Since, however, Puig has failed to meet the objectives that were understood to be achieved in the short term, delaying the acquisition of this percentage of Charlotte Tilbury still in the hands of its founder until 2031.

With new purchase options, for between 2026 and 2031

In this regard, and according to an announcement by the management of the Spanish firm, both parties have formally agreed to delay the acquisition of a minority stake, that would bring Puig's ownership to the full 100 percent, with a new deadline under various purchase options set to be between 2026 and 2031, after which time the agreement will expire.

Puig had dressed up the delay of these options as an "extension of its strategic collaboration" between Puig and the founder of Charlotte Tilbury, potentially creating a lack of clarity for the markets and Puig investors. Away from Puig's intent to exhibit itself as a firm that takes a "unique approach to collaboration with visionary founders", it is possible to point to two more causes as to why the firm decided to delay its acquisition and issue its subsequent unclear reporting.

On the one hand, Puig shares have experienced rapid depreciation and poor performance on the stock market since the company presented its first accounts as a listed company, for the first half of its 2024 financial year. On the other hand, the company also faced difficulties at the beginning of December as a result of the withdrawal of some Charlotte Tilbury cosmetic batches due to quality problems. A product recall of the brand's 'Airbush Flawless Setting Spray' was acknowledged to have an impact on the results of Puig's makeup segment, which had managed to return to a positive sales growth performance at the end of the third quarter of this fiscal year 2024.

These two factors could have led Puig's management to appreciate that this was not the best time to move forward with a takeover of Charlotte Tilbury's share capital, while still recognising that there were benefits from continuing to be linked to the Tilbury name. It thus guarantees an active role for Tilbury in the development and future evolution of the company, for the short to medium term, even if it means contradicting the line of actions Puig established to justify its IPO.

Leaving aside this interpretation, and returning to how Puig has tried to communicate the signing of this agreement, the company labelled the move as a "privilege to continue our close collaboration with Charlotte and her team”. In a statement, Puig said: “Charlotte has a unique and pioneering vision, differentiated from other makeup artist brands, which was already redefining the future of makeup and skin care when we started working together in 2020." Marc Puig, executive president of Puig, also commented that the company had achieved a lot since this time, adding that “it is a great pleasure to announce the extension of our collaboration” with such an “exceptional brand”, with which he was "looking forward to continuing to work together to make it grow even further”.

Stocks fall to historic low

Although the announcement has not led to a sharp and sudden new depreciation in the value of Puig shares, it has ended up leading the company to mark a new historic low in the price of its shares. On Wednesday, shares of the company fell to 18.04 euros, reflecting a drop of -24.89 percent on the 24.50 euros at which its Puig shares were first listed in May. This dropped a further 2.09 percent on Thursday, coming to 17.59 euros per share.

This article originally appeared on FashionUnited.ES. It was translated to English using an AI tool called Genesis and edited by Rachel Douglass..

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Charlotte Tilbury

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