French luxury group Kering has agreed to sell its beauty business to cosmetics giant L'Oreal for 4 billion euros as new chief executive Luca de Meo addresses the company's substantial debt burden.
The transaction includes fragrance label Creed and long-term licensing rights for beauty products under Kering's premier fashion houses Gucci, Bottega Veneta and Balenciaga.
The strategic divestment represents de Meo's first major initiative since assuming leadership in September, reversing predecessor Francois-Henri Pinault's diversification strategy that established the beauty unit just two years earlier.
Kering acquired Creed for 3.5 billion euros in 2023 but recorded a 60 million euro operating loss during this year's first half while struggling to revitalize its flagship Gucci brand.
The sale provides crucial financial relief for Kering, which carried 9.5 billion euros in net debt alongside 6 billion euros in long-term lease obligations by June's end.
Gucci revenues plummeted 25 percent year-over-year in recent quarterly reports, intensifying pressure to stabilize finances and avoid additional credit rating downgrades through strategic asset restructuring.
L'Oreal's acquisition marks its largest corporate purchase to date, surpassing last year's $2.5 billion acquisition of Australian brand Aesop.
The beauty conglomerate already manufactures Yves Saint Laurent fragrances after purchasing those rights from Kering in 2008, establishing a continued partnership between the French luxury and cosmetics powerhouses through the new 50-year licensing arrangement.