US cosmetics giant Estée Lauder has ended merger talks with Spanish rival Puig over a deal that would have created a fashion and beauty powerhouse worth nearly $40 billion (€34.4 billion).Estée Lauder said on Thursday that “the parties have terminated discussions regarding a potential business combination”. Puig also confirmed the talks had ended.The merger would have brought together Estée Lauder’s vast portfolio of high-end brands, including Clinique and Tom Ford Beauty, with Puig’s Charlotte Tilbury and Jean Paul Gaultier under one roof, amid a shake-out in the wider beauty sector.“We are grateful for the conversations we have had with Puig,” said Estée Lauder’s chief executive Stéphane de La Faverie. “Today, we are reiterating our confidence in the power of our incredible brands, our talented teams, and our strength as a stand-alone company.”Estée Lauder’s shares jumped by 11.5 per cent in post-market trading on Thursday, as investors welcomed the end of the talks. When the FT first reported on the discussions with Puig in March, shares fell roughly 20 per cent.Talks dragged because of questions over the balance of power between the two families and issues such as the allocation of board seats, according to a person familiar with the matter.In a separate statement, Puig’s chief executive José Manuel Albesa, said “we appreciate the meaningful conversations”, adding: “This decision does not alter our strategic roadmap ... We will continue to take a highly selective and value-focused approach to M&A in order to further complement our portfolio.”Both companies are controlled by families. Puig traces its origins back more than a century, and Estée Lauder was founded in 1946. The deal would have brought together the billionaire Puig and Lauder families, who remain the largest shareholders in the brands they founded.Estée Lauder and Puig did not previously disclose the terms of the potential transaction.Shares in the Spanish group have slid steadily lower since its IPO in May 2024.Shrinking revenues and questions over succession have also pushed Estée Lauder’s share price down almost 80 per cent from its all-time high in 2021. De La Faverie said on Thursday that the company would press ahead with its “Beauty Reimagined” turnaround plan.Nik Modi, an analyst at RBC Capital Markets, said he was “relieved” that the talks had ended. “We continue to believe that [Estée Lauder’s] underlying story has meaningful momentum and integration risk of a potential combination would have weighed on the stock for an extended period of time,” he wrote in a note. – Copyright The Financial Times Limited 2026