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Estée Lauder and Puig End Merger Talks · Bloomberg Intelligence

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  Speaker 2: All right, let's go to one of the deals stories
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  Speaker 2: that had been you know, really supporting this idea that
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  Speaker 2: deal making is back with a vengeance sday Lauder and Pooge.
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  Speaker 2: It's a Spanish cosmetics company, luxury brands company really in
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  Speaker 2: talks to merge. Those merger talks seem to have fallen apart.
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  Speaker 2: Deb Acon is our Luxury Goes analysts joining us right
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  Speaker 2: now from London. Deb What can you tell us about
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  Speaker 2: why these discussions collapsed?
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  Speaker 3: Bhie? The room is in the market, the comments in
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  Speaker 3: the marketer around the brand which is seventy nine percent
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  Speaker 3: owned by Pooh Charlotte Tilbury, and that there is you know,
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  Speaker 3: there's a pot call option in place till twenty thirty
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  Speaker 3: one with a view that perhaps more was expected in
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  Speaker 3: terms of valuation from the original owner, but really we
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  Speaker 3: don't know that it is that and there was a
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  Speaker 3: lot riding on this deal coming together really given that
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  Speaker 3: esdal Order was amid a big strategic overhaul under its CEO,
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  Speaker 3: Stephan Della Feverrary, so you know that there are a
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  Speaker 3: lot of things going on. Also, the added risks in
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  Speaker 3: the market, to with what's happening in Iran, the knock
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  Speaker 3: on impact onto travel Retail, which has been with us
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  Speaker 3: since the middle of March, so many different things.
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  Speaker 4: Really, where does ste latter go from here on out? Then,
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  Speaker 4: because they're left to focus on reviving their company and
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  Speaker 4: they reported three years of animal sales drop they did.
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  Speaker 3: I think if I look at both companies, the reason
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  Speaker 3: for them coming together was because if I think about
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  Speaker 3: estill Order and where the market's been in the last
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  Speaker 3: couple of years, estill Order only has about nineteen percent
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  Speaker 3: of its business in Fragrance, whereas the majority of the
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  Speaker 3: business of Pooge, although it's built in a makeup and skincare,
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  Speaker 3: its history is in Fragrances with Jean Paul Gautier and
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  Speaker 3: then also Carolina Herrera Pacaraban and others. So it was
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  Speaker 3: a combination of the two of those coming together that
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  Speaker 3: if there was some excitement, that was it. But overall,
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  Speaker 3: if we think about estill order. They are doing more
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  Speaker 3: in innovation, they are doing more in shifting online, they
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  Speaker 3: are doing more in cost savings. They have a huge
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  Speaker 3: strategy running at the moment, the Profit Growth Program PRGP,
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  Speaker 3: where they're looking actually for savings of one to one
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  Speaker 3: point two billion to start to come through from next
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  Speaker 3: fiscal year, so fiscal twenty seven. It's been at a big
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  Speaker 3: upfront cost, and so a lot of the maybe risk
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  Speaker 3: and analysis and the questions on these two companies coming
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  Speaker 3: together were just when the growth and the profits are
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  Speaker 3: supposed to come through, would Pooge have inhibited that in
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  Speaker 3: that it would take them have taken them longer to
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  Speaker 3: turn around. So certainly today Poosha's share price is down
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  Speaker 3: and ester Lauders is up, and that's contrary to how
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  Speaker 3: it was on the day when it was announced two
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  Speaker 3: months ago.
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  Speaker 2: Very quickly dead before we let you go? Is Poosh
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  Speaker 2: still on the lookout for a merger partner?
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  Speaker 3: The issue is going to be that if Charlotte Tilbury
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  Speaker 3: is a part of the contested deal that carries forward
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  Speaker 3: and so could be a bit of a poison pill. Potentially,
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  Speaker 3: I would imagine that both of these companies that look
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  Speaker 3: in for acquisitions that it could make sense for both
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  Speaker 3: of them. You know, Pooge could find more of a
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  Speaker 3: global platform and xtly Lauder needs for me more in fragrances.
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  Speaker 3: I've said that for several years, so I think there
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  Speaker 3: were ways forward for both of them within the M
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  Speaker 3: and A field.
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  Speaker 5: Stay with us.
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  Speaker 2: More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Corplay and Android
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  Speaker 1: you get your podcasts, or watch us live on YouTube.
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  Speaker 4: Let's shift gears a little bit our shift planets. I
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  Speaker 4: guess I was trying to make a smart segue yeah
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  Speaker 4: versus Yeah, yes, let's not bring in George Ferguson. He's
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  Speaker 4: Bloomberg Intelligence senior aerospace, defense and airline analysts to discuss
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  Speaker 4: with us all things SpaceX. I feel like all this
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  Speaker 4: week has been all about SpaceX, So George, thank you
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  Speaker 4: for joining us. Talk to us about the slow launch
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  Speaker 4: revenue gain of SpaceX. We know that they dominate in
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  Speaker 4: global spaceflight, but I guess most missions support their own
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  Speaker 4: satellite internet business rather than external customers. Can you please
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  Speaker 4: unpack that for us?
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  Speaker 6: Yeah, so we in the filing this week, we got
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  Speaker 6: a chance to look at their businesses and it was
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  Speaker 6: pretty remarkable. I thought, the percent of space launch that
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  Speaker 6: actually is just supporting their low Earth orbit constellation business,
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  Speaker 6: it was like seventy four seventy five percent of all launches. Again,
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  Speaker 6: we're supporting their LEO constellations, about nine thousand, six hundred
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  Speaker 6: satellites up there, and in the first quarter of the
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  Speaker 6: new year even a bit larger it was up in
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  Speaker 6: the eighties. So when you look at the businesses, their
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  Speaker 6: launch business actually only comes in around four billion ish
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  Speaker 6: a year, much smaller than the connectivity business, which is
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  Speaker 6: that low orbit satellite business. But we think that they
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  Speaker 6: if they accounted for it correctly, if they did some
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  Speaker 6: sort of transfer pricing and showed revenue because they don't
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  Speaker 6: show revenue, they don't show sort of earned revenue for
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  Speaker 6: the flights for their lower urban constellation. They showed revenue
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  Speaker 6: for it, we think it'd be a twelve billion dollar
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  Speaker 6: business and there's a lot of technology in that business.
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  Speaker 6: Interesting business to us.
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  Speaker 2: George, when you looked at the IPO filing, what did
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  Speaker 2: you learn about SpaceX's competitors the rest of the space economy,
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  Speaker 2: those companies that also purport to be at the cutting
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  Speaker 2: edge of this industry.
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  Speaker 6: Well, I think we learned and it confirmed for us
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  Speaker 6: that their competitors are really far behind now, you know.
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  Speaker 6: I think one of the things I took away from
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  Speaker 6: the filing was, you know, SpaceX did something like one
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  Speaker 6: hundred and sixty some launches last year. Lots of other competitors,
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  Speaker 6: most of the competitors aren't you over fifty, so they're
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  Speaker 6: far and away sort of the most repetitive launch company
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  Speaker 6: in the world. Again, I was kind of surprised how
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  Speaker 6: much was for their own constellation because we kind of
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  Speaker 6: felt like demand was really growing for LEO satellites and
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  Speaker 6: it is. But the sense I get from the filing
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  Speaker 6: is they're growing most of the demand for these low
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  Speaker 6: orbit satellites. I think more folks, more governments, more companies
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  Speaker 6: will be launching low Earth orbit satellites, and this space
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  Speaker 6: business will be a really important business. But I think
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  Speaker 6: that was one of the bigger takeaways from the filing.
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  Speaker 4: And many, at least some of the people I spoke to,
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  Speaker 4: said that the entire base case depends on Starship operating
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  Speaker 4: at a cadence by twenty twenty seven. But if Starship
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  Speaker 4: slips materially beyond that timeline, what do you make of that?
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  Speaker 4: Does that still support the current valuation of SpaceX.
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  Speaker 6: Yeah, so look, I mean the value is astronomical. I
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  Speaker 6: guess maybe pun intended. You're really buying into a big,
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  Speaker 6: glorious vision of the future of data centers and communications
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  Speaker 6: on the Earth. Right, You're buying into data centers being
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  Speaker 6: in space, using the Sun's energy, solar panels to power them,
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  Speaker 6: using space to cool them fixes a lot of problems
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  Speaker 6: that data centers have here on the Earth. Traditionally, there's
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  Speaker 6: a lot of work to be done to get that
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  Speaker 6: to happen. You're also sort of buying into a world
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  Speaker 6: where we're using devices on the surface of the Earth
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  Speaker 6: to communicate into space and do some of our internet
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  Speaker 6: and telecommunication work. That's already happening. So you're sort of
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  Speaker 6: buying into that big glorious future. Starship is all about
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  Speaker 6: lifting more of that equipment into orbit. You need sort
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  Speaker 6: of starships one hundred to one hundred and fifty the
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  Speaker 6: sorry a ton capacity to get into orbit. You need
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  Speaker 6: them to drive down those costs of getting things into orbit.
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  Speaker 6: So look, I don't think Starship not working by twenty
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  Speaker 6: twenty seven crushes this sort of view of the of
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  Speaker 6: the future. If you're buying into the IPO and you
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  Speaker 6: know it becomes two or you know, one three quarter
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  Speaker 6: two trillion dollar IPO and you've bought in it ninety
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  Speaker 6: times revenue, there may be disappointment in the marketplace. I mean, honestly, again,
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  Speaker 6: those valuations are crazy to me. But look, you're buying
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  Speaker 6: into a big tech company. But if it doesn't happen
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  Speaker 6: by twenty twenty seven, is at the end of this
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  Speaker 6: sort of vision of how the future could unfold. I
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  Speaker 6: don't think so at all. They're far and ahead in
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  Speaker 6: launch SpaceX is. They're thinking about data centers in space.
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  Speaker 6: No one else is even thinking about it. If it works,
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  Speaker 6: it could be great. And holding them to a time
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  Speaker 6: a tight timeline I think is a bit challenging because
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  Speaker 6: they are really cutting edge and no one's competing for
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  Speaker 6: them on that cutting edge.
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  Speaker 2: The number that really got my attention in this ip
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  Speaker 2: of filing was this idea of a total addressable market. Yes,
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  Speaker 2: I mean it was like twenty nine eight and a
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  Speaker 2: half trillion dollars twenty nine trillion. I mean, at this point,
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  Speaker 2: what's a half of trillion dollars? How do you reverse
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  Speaker 2: engineer that?
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  Speaker 6: Look, all of the numbers are big, and I guess
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  Speaker 6: the beautiful beauty about that is again, how do you
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  Speaker 6: reverse engineer? And my view on it again, look as
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  Speaker 6: clearly AI and data centers has to be a persistent
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  Speaker 6: trend for those numbers to come true, right, and we're
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  Speaker 6: seeing the beginning of AI and fold it looks interesting
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  Speaker 6: in some areas. In some areas I use, AI looks
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  Speaker 6: off base. It does consume a lot of energy, It
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  Speaker 6: does have some folks that that aren't the happiest with
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  Speaker 6: a future that's helping, you know, being driven by AI.
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  Speaker 6: So I think you got a first that you got
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  Speaker 6: to buy into. AI is the future. We'll do more
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  Speaker 6: of our thinking, more of our processes, you know, take
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  Speaker 6: the I guess the droll items off all our workplates
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  Speaker 6: and then you got to buy into a world where
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  Speaker 6: you can put that in space and the communication to
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  Speaker 6: space gets faster so there's no latency. So to be
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  Speaker 6: honest with that, we see those big numbers, I find
• 11:35
  Speaker 6: them interesting. Reverse engineering them is really difficult at this point. Again,
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  Speaker 6: I think you really got to buy into this is
• 11:44
  Speaker 6: a cutting edge tech company. You think you know how
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  Speaker 6: the future is going to and hold unfold. Elon Musk
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  Speaker 6: looks like the guy that will be, you know, steering
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  Speaker 6: these enterprises that will help this future unfold. But to
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  Speaker 6: sort of round out all of his numbers on what
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  Speaker 6: it means, I think it's kind of kind of difficult.
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  Speaker 6: I think you're buying into Elon Musk his vision of
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  Speaker 6: the future and his ability to execute over time.
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  Speaker 1: Stay with us.
• 12:12
  Speaker 5: More from Bloomberg Intelligence coming up after this.
• 12:18
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 12:22
  Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and
• 12:24
  Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand
• 12:28
  Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
• 12:32
  Speaker 2: There's this weird bifurcation in the markets right now because,
• 12:35
  Speaker 2: as John was telling us, stocks are higher, s and
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  Speaker 2: P five hundred gaining five tens of one percent. There's
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  Speaker 2: going to be a lot of big IPOs coming out,
• 12:42
  Speaker 2: like SpaceX, like open AI, and then you look at
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  Speaker 2: everything else. Oil prices are higher, bonials have actually given
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  Speaker 2: up some of their losses and are now higher, especially
• 12:52
  Speaker 2: at the short end, because the Federal Reserve Governor Christopher
• 12:55
  Speaker 2: Waller now says he supports making clear that the Fed's
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  Speaker 2: next move could be just as much a rate increase
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  Speaker 2: as it could be a rate cut. So where does
• 13:05
  Speaker 2: that leave someone who invests in real assets like real estate?
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  Speaker 2: Let's ask Liz Hart. I mean, it's a puzzling question.
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  Speaker 4: That is true. Everyone just points to corporate earnings. But yeah,
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  Speaker 4: I mean it's an interesting bifurcation in the Marcos. Everything
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  Speaker 4: AI is great, but you see a lot of concerns
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  Speaker 4: well when it comes to others. All right, Liz Hart
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  Speaker 4: is joining us now.
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  Speaker 2: She's president of Leasing for North America at Newmark and Liz,
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  Speaker 2: I know you're eager to jump in, so give us
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  Speaker 2: your take on how you see things out there.
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  Speaker 5: Absolutely so. I think you're right. This is a very
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  Speaker 5: selective recovery. We're seeing great demand in places like Manhattan
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  Speaker 5: and in San Francisco, where AI is certainly driving the story.
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  Speaker 5: As you just commented on.
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  Speaker 4: How much of the sector's outlook in general depends on
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  Speaker 4: the path of interest rates and how are you positioning
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  Speaker 4: in lieu of the changing outlook minted by minute.
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  Speaker 5: Absolutely so, it does seem that we will be at
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  Speaker 5: a higher for longer environ But what we're seeing right
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  Speaker 5: now is the demand is still surging. You still have
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  Speaker 5: AI companies leasing more space in Manhattan in the first
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  Speaker 5: quarter than they did all of last year. You have
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  Speaker 5: San Francisco at record demand right now, mostly driven by
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  Speaker 5: those AI companies. Again, so it does seem as though,
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  Speaker 5: even though there may be a higher for longer environment,
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  Speaker 5: that companies are really optimizing for productivity and talent and
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  Speaker 5: how they can drive their businesses forward right now.
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  Speaker 2: Okay, yeah, but New York and San Francisco are not
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  Speaker 2: the rest of the country. These are kind of exceptional markets.
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  Speaker 2: You are up in Boston right now, and when I
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  Speaker 2: say up, it's because we're in New York, so you're
• 14:32
  Speaker 2: up plus. Yes, Boston is one of those places where
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  Speaker 2: one of those cities where the government funding decreases for
• 14:40
  Speaker 2: universities in Boston has really been felt, especially in the
• 14:43
  Speaker 2: biotech sector. How do things look in places like Boston
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  Speaker 2: which are so tied to universities and government funding.
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  Speaker 5: Well, I think what you're seeing really is a recovery
• 14:52
  Speaker 5: that's starting at the trophy end of the segment. And
• 14:54
  Speaker 5: we've talked about this before, but the trophy segment still
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  Speaker 5: appears to be pretty good in all of those major
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  Speaker 5: markets right now. Where you're seeing more of an issue
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  Speaker 5: is the bottom of the market where there isn't as
• 15:03
  Speaker 5: much activity or demand.
• 15:05
  Speaker 4: What about how are you seeing AI? In your note
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  Speaker 4: you allude to how AI is not a space reducer,
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  Speaker 4: it's a demand generator, but that's kind of hard for
• 15:15
  Speaker 4: some to believe.
• 15:17
  Speaker 5: Well, absolutely, but it really is driving the demand in
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  Speaker 5: a lot of those major markets. You're seeing companies that
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  Speaker 5: didn't even exist taking over one hundred thousand square feet
• 15:26
  Speaker 5: and often over three or four hundred thousand square feet,
• 15:28
  Speaker 5: and so that shows us something that's really interesting about
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  Speaker 5: this next generation economy is that those people who are
• 15:33
  Speaker 5: on the cutting edge, they're choosing to be in the office.
• 15:36
  Speaker 5: They're really choosing to prioritize how they work, and we
• 15:38
  Speaker 5: think that's a very interesting signal of how other sectors
• 15:41
  Speaker 5: are going to start to adopt over time and how
• 15:43
  Speaker 5: they can drive their businesses. Because AI really will impact
• 15:47
  Speaker 5: all of us in all sectors. It's just going to
• 15:48
  Speaker 5: take some time to have that happen.
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  Speaker 2: So when you see the buildout of some of these
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  Speaker 2: AI companies, particularly in San Francisco, the Bay Area, and
• 15:56
  Speaker 2: maybe in places like in New York. Where else do
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  Speaker 2: you see them going to If the real estate in
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  Speaker 2: those cities are too expensive, then they want to be
• 16:04
  Speaker 2: able to keep their costs under control but still be
• 16:07
  Speaker 2: able to insist on a physical footprint.
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  Speaker 5: Absolutely, So, I think there's two things that are happening
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  Speaker 5: right now in those major markets you mentioned. Starting at
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  Speaker 5: the beginning of last year, we actually saw a little
• 16:18
  Speaker 5: bit of a pop in good quality class B space
• 16:22
  Speaker 5: as long as it was ready for occupancy right away.
• 16:24
  Speaker 5: So because there's such a rush on AI right now,
• 16:27
  Speaker 5: people really want to build today. They don't want to
• 16:29
  Speaker 5: wait for tomorrow, so they're looking for stuff that they
• 16:31
  Speaker 5: can get really quick occupancy on, and that's definitely driving
• 16:34
  Speaker 5: different categories in those high talent metric markets. In terms
• 16:38
  Speaker 5: of other markets outside of San Francisco and New York,
• 16:41
  Speaker 5: we're starting to see AI companies go to Bellevue definitely,
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  Speaker 5: a little bit in Boston. London, Singapore are great markets,
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  Speaker 5: and even a couple that are starting to look in
• 16:51
  Speaker 5: Los Angeles.
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  Speaker 4: You also write that the issue is not that office
• 16:55
  Speaker 4: space is tight, it's that the right space is increasingly tight.
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  Speaker 4: Talk to us about what the right space it is.
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  Speaker 4: I mean, Scarlet made a point that everyone probably wants
• 17:03
  Speaker 4: to be in the major cities like San Francisco, of Boston,
• 17:06
  Speaker 4: New York and others and may have missed and many
• 17:08
  Speaker 4: will be offended. But can you talk a little bit
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  Speaker 4: more about that.
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  Speaker 5: Yeah, I know they certainly want to be in high
• 17:14
  Speaker 5: quality office space and they want to have it as
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  Speaker 5: soon as they can so that they can really focus
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  Speaker 5: on driving their businesses forward. I mean, look, if you're
• 17:20
  Speaker 5: looking at the quality of space, typically that means having
• 17:23
  Speaker 5: good natural light, good open areas where people can collaborate
• 17:26
  Speaker 5: with each other. Just high quality space has really been
• 17:28
  Speaker 5: driving the story for quite a long time, and obviously
• 17:31
  Speaker 5: always a bonus if it's creative for the technology sector
• 17:33
  Speaker 5: as well. They tend to like those type of finishes.
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  Speaker 4: It sounds like my apartment hunt, Scarlet, because I also want.
• 17:39
  Speaker 5: Good lights, and yeah, natural light and creative finishes, that's
• 17:42
  Speaker 5: what we all want, right, It's like the.
• 17:44
  Speaker 2: Holy grail, both for office space and for apartments. Liz,
• 17:49
  Speaker 2: we started off by saying how interest rates, especially in
• 17:52
  Speaker 2: the rates market, are moving higher. They're fairly elevated. You know,
• 17:56
  Speaker 2: not just in the US, but in the UK and
• 17:58
  Speaker 2: Japan as well. What concerned are you about mortgage rates,
• 18:02
  Speaker 2: about interest rates and how they will stay at these
• 18:04
  Speaker 2: elevated levels for longer than maybe a lot of people anticipated.
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  Speaker 5: It's something that certainly is a factor. But again, I
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  Speaker 5: think with what's happening with AI and this big you know,
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  Speaker 5: change that we're having is really the companies we're talking
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  Speaker 5: to are most focused on productivity. How do they position
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  Speaker 5: their businesses for growth and moving through this That's something
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  Speaker 5: that those companies don't control, right, So they have to
• 18:24
  Speaker 5: live within the environment and within the moment of opportunity
• 18:27
  Speaker 5: that they have today, and they have to place their bets.
• 18:30
  Speaker 4: Do you think we're near the bottom for commercial real
• 18:33
  Speaker 4: estate evaluations or do you think there's going to be
• 18:34
  Speaker 4: more pain ahead?
• 18:36
  Speaker 5: It's certainly bifurcated. I think we're definitely behind. I think,
• 18:39
  Speaker 5: you know, twenty twenty five was the real pivot in
• 18:41
  Speaker 5: the major markets, and we're starting to can see other
• 18:43
  Speaker 5: markets pivot over time. So I do think the bottom
• 18:45
  Speaker 5: is behind us.
• 18:47
  Speaker 2: If the bottom is behind us, which markets are lagging
• 18:49
  Speaker 2: behind and still have a little bit of consolidation to go.
• 18:54
  Speaker 5: Well, I mean, it's really all the ones that we're
• 18:55
  Speaker 5: not mentioning, you know, in New York, San Francisco, those
• 18:58
  Speaker 5: are the ones that are ahead. For sure. This piece
• 19:00
  Speaker 5: has been performing exceptionally well, so that's another bright spot.
• 19:03
  Speaker 5: But there's others who still need a little bit more
• 19:05
  Speaker 5: demand to come in, and I think that we'll start
• 19:07
  Speaker 5: to see that through the end of the year.
• 19:10
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• 19:18
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• 19:29
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