Gucci owner Kering to sell beauty unit to Loreal

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Gucci-owner Kering has agreed to sell its beauty business to L'Oreal for 4 billion euros ($4.7 billion). The decision comes as part of the luxury group's efforts to reduce debt and refocus on its fashion business.

The partnership includes the rights to enter into a 50-year exclusive license for the creation, development, and distribution of fragrance and beauty products for Gucci. Under this deal, L'Oreal will acquire Kering's fragrance line Creed. L'Oreal will also have the rights to develop fragrance and beauty products under Kering's luxury fashion label Bottega Veneta, Gucci and Balenciaga.

De Meo, the current CEO who took over in September further shared he plans to take some difficult decisions to cut Kering's debt. The company has struggled in recent years to reverse declining growth at its largest brand Gucci, which was hit hard by slowing demand in the key Chinese market.

L'Oreal will pay royalties to Kering for the use of its licensed brands. L'Oréal, which noted it is considering several acquisitions this year, was reportedly approached by representatives of the Armani Group. The beauty conglomerate was named in the late Giorgio Armani's will as one of the preferred buyers for a minority stake in his fashion label.

The license for Gucci fragrance is currently held by Coty. The new deal will commence after its expiration, believed to be in 2028. Kering set up its beauty business in 2023. The deal for Kering beauty will be L'Oreal's largest to date, bigger than its purchase of Australian brand Aesop for $2.5 billion in 2023.