Luxury conglomerate Kering has sold its beauty division to L’Oreal for US$4.6 billion (EU$4 billion), as part of its strategy to streamline operations and focus on core fashion houses.

Under the agreement, L’Oreal will hold 50-year exclusive licenses to create, develop and distribute fragrances and cosmetics for Creed, Bottega Veneta and Balenciaga.

The deal also includes the future acquisition of Gucci Beauty once its existing licence with Coty expires.

Kering CEO Luca de Meo described the partnership as a step forward to accelerate the growth of its fragrance and cosmetics houses.

“Joining forces with the global leader in beauty will allow us to achieve scale in this category and unlock their immense long-term potential,” he added.

A strategic committee will be established to coordinate between Kering’s brands and L’Oreal, ensuring consistency across the categories.

Moreover, the companies will explore business opportunities in planned 50/50 joint ventures.

L’Oreal CEO Nicolas Hieronimus said the partnership will help expand its reach into high-growth segments.

“We will establish ourselves as one of the leading players in the fast-growing niche fragrance market,” said Hieronimus.

“Gucci, Bottega Veneta and Balenciaga are all exceptional couture brands with enormous potential.”

The agreement, expected to close in the first half of next year, will be settled in cash and remains subject to regulatory approval.