Puig Shares Drop After Puig and Estée Lauder End Merger Talks

Shares of Spanish fragrance and fashion group Puig fell sharply on Friday after the company and U.S. cosmetics giant Estée Lauder announced they had ended talks regarding a potential merger. The discussions, which had become public in March, would have created a combined luxury beauty entity valued at approximately $40 billion.

Puig's stock dropped around 14 percent, placing it at the bottom of Europe's benchmark STOXX 600 index. The decline erased most of the gains the shares had made since the merger talks were first reported. In contrast, Estée Lauder's shares rose more than 10 percent in extended U.S. trading following the announcement on Thursday.

According to statements from both companies, the negotiations were terminated after the parties failed to reach an agreement. People familiar with the matter indicated that key sticking points included the future governance structure of a combined company, specifically which founding family would hold the balance of power and the allocation of board seats.

In a statement, Estée Lauder said it was confident in its strength as a standalone company and would remain focused on its existing turnaround plan. Chief Executive Stéphane de...