US cosmetics maker Estée Lauder and Spanish perfume group Puig had been finalizing the details of a deal when talks fell apart late on Thursday, preventing a merger that would have created a $40 billion luxury beauty giant.

The merged company would have put together brands such as Tom Ford, Clinique and MAC with Carolina Herrera and Charlotte Tilbury, popular with TikTok influencers and affluent millennials.

But leaks, disagreements between the powerful controlling families, and demands, including from make-up magnate Charlotte Tilbury, led the talks to collapse, five people with direct knowledge of the deal told Reuters.

On Thursday evening in Barcelona, and morning in New York, Puig grandee Marc Puig got on the phone with Estée Lauder chairman William Lauder to assess the deteriorating situation, one of the sources said.

Shortly afterwards, advisers on both sides began exchanging messages, according to a second source with knowledge of the discussions. One of the messages included a skull emoji meaning the deal was dead.

Spokespeople at Puig and Estée Lauder declined to comment.

Charlotte Tilbury’s minority stake

The latest stumbling block had been demands linked to Charlotte Tilbury, the founder of the eponymous beauty brand majority-owned by Puig, regarding the terms of her minority stake, all five sources said.

Charlotte Tilbury’s firm declined to comment.

The five sources, close to both sides of the talks, spoke on condition of anonymity because the process was confidential.

Three of the people said the two groups had repeatedly been about to announce a merger.

Estée Lauder had assembled a team of advisers who worked through last weekend on a valuation of Puig, requested by Spain’s stock market regulator as part of the proposed transaction, according to one of the sources.

Months of negotiations across continents

Discussions between the two sides began late last year, one of the sources said.

When they became public knowledge in March, investors viewed the prospect of a deal as better for Puig than Estée Lauder. Puig’s shares spiked and the US company’s shares fell.

The reverse happened after the talks collapsed as Estée Lauder rose around 10% on Friday, while Puig fell 13%.

Estée Lauder investors’ dislike of the deal was another factor that hindered the talks, according to three sources.

The company’s return to stronger earnings growth in its most recent quarter meanwhile increased its confidence in remaining independent, the three sources added.

The months of negotiations included meetings in Paris, New York and Barcelona, and achieved apparent agreement in principle on issues such as the governance of the new entity.

Other points discussed included a possible dual listing in New York and Madrid, retaining Barcelona as the headquarters for the combined fragrances business, and details on how to reach the synergies of the combined company, two of the people said.

Both founding families, Lauder and Puig, wanted to keep a say in the new group, according to two sources with knowledge.

The companies also struggled to resolve how to structure assets such as Charlotte Tilbury and sun care brand Isdin – two of Puig’s main profit-drivers, in which the group does not hold full ownership, two of the sources said.