Bank of America highlighted the potential merger between Estee Lauder Companies Inc (NYSE:EL, XETRA:ELAA) and Spanish beauty group Puig as a transformational move that could reshape Estee Lauder’s growth story.

“A merger with Puig would completely change the Estee Lauder equity story from one which was driven by its Beauty Reimagined turnaround plan to transformational M&A driving more balanced geographic and category exposure at scale,” the bank’s analysts wrote in a note.

Estee Lauder confirmed it is in discussions with Puig, though no agreement or final decision has been made. If completed, the combined company would rank as the world’s second-largest listed beauty firm, with pro forma 2026 revenues of $21.6 billion and EBIT of $2.8 billion, reflecting a 13.1% margin before synergies.

The Bank of America note identified three potential drivers for a merger: scale, diversification, and cost savings. Scale could allow R&D, digital, and AI investments to be spread across a larger portfolio.

Diversification, both geographic and category-wise, could reduce volatility and accelerate growth in new markets, particularly for Estee Lauder brands in Europe, Latin America, and fragrances.

Cost savings could come from head office consolidation, dual listing, media buying, and supplier negotiations, with potential synergies estimated at $50 million to $100 million.

Assuming an all-equity transaction using current market capitalizations, Bank of America estimated the combined group would trade on roughly 2 times 2026 sales and a 21.6 times P/E, below peers at 3.7 times sales and historic M&A multiples of 4–5 times. The analysts highlighted that there is “no visibility over potential deal economics, nor the structure of any ‘newco.’”

Bank of America maintained its 'Buy' rating on Estee Lauder with a $130 price target, expecting the stock to more than double from current levels of about $73.