US cosmetics giant Estée Lauder is discussing a potential merger with Puig, the Spanish company behind best-selling fragrances such as Rabanne and Jean Paul Gaultier.

Estée Lauder is one of the world's leading manufacturers of skin care, make-up and fragrances, owning brands such as Clinique, Bobbi Brown and Tom Ford.

A deal could create a $40bn (£30bn) beauty giant, according to the Financial Times, although Estee Lauder said that no final decision had been made.

"Unless and until an agreement is signed between the companies, there can be no assurances regarding the deal or its terms," it said in a statement.

Puig, which is based in Barcelona, was founded in 1914 and is still controlled by the Puig Family.

The group, which also owns fashion label Dries Van Noten and fragrance giant Carolina Herrera, sells its products in 150 countries and had revenue of more than €5bn (£4.3bn) in 2025.

Estee Lauder, who died in 2004, founded her namesake cosmetics company in 1946 in New York with her husband Joseph.

It started with just four products but has grown to become the second largest cosmetics company in the world after L'Oréal.

However, it was forced to cut jobs last year amid sluggish sales and is trying to revitalise its business.

Shares in the firm closed almost 8% lower on Monday following news of the potential deal

The talks follow other recent deals in the beauty sector, including Hailey Bieber's skincare brand Rhode being acquired by E.l.f. Beauty in a deal worth up to $1bn.

Gucci-owner Kering also agreed last year to sell its beauty business to L'Oreal for €4bn.