LONDON (ShareCast) - (Sharecast News) - Gucci owner Kering has agreed to sell its beauty business to L'Oreal for €4bn as part of a long-term strategic partnership.
The deal, announced on Sunday, will see L'Oreal buy The House of Creed, the beauty and fragrance licenses of Houses of Kering and enter into "an exclusive venture to explore business opportunities in the field of wellness and longevity".

Kering said 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, once the current license with Coty expires.

Chief executive Luca de Meo said: "This strategic alliance marks a decisive step for Kering.

"Joining forces with the global leader in beauty, we will accelerate the development of fragrance and cosmetics for our major Houses, allowing them to achieve scale in this category and unlock their immense long-term potential, as did Yves Saint Laurent Beauté under L'Oréal's stewardship.

"Together, we will also venture into new frontiers of wellness, combining the unrivalled expertise of L'Oréal with our unique luxury reach. This partnership allows us to focus on what defines us best: the creative power and desirability of our Houses."

Kering also owns Saint Laurent, Bottega Veneta, Balenciaga and Boucheron, among other brands.

L'Oreal chief executive Nicolas Hieronimus said: "I am delighted to forge this long-term strategic alliance with one of the world's most prestigious, creative and visionary luxury groups. This partnership will further solidify our position as the world's #1 luxury beauty company and allow us to explore new avenues in wellness together."

At 1300 BST, Kering shares were up 3.6% at €320.65, while L'Oreal was 0.3% higher at €391.95.

Russ Mould, investment director at AJ Bell, said: "Beauty and wellness are markets with significant untapped potential, and L'Oréal and Kering are teaming up to try and take advantage of this opportunity.

"L'Oréal's purchase of the House of Creed and the beauty and fragrance licences of Houses of Kering, including brands like Balenciaga and Gucci, should help bolster the company's credentials in the high-end component of the beauty market.

"For Kering, this is the first big move on the part of new CEO Luca de Meo, as he seeks to turn around the fortunes of the struggling luxury goods firm. Notably, it provides it access to L'Oréal's logistics and distribution capabilities. It also allows the company to make a meaningful dent in its onerous borrowing pile.

"Kering shares have already raced higher on de Meo's appointment as investors took note of his successful spell leading a recovery at Renault - albeit in a different industry.

"Longer term, there is a stated aspiration for L'Oreal and Kering to work together in wellness and longevity - the latter likely to become ever more prominent as technology develops and consumer appetite grows."

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