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De Meo accelerated Kering's beauty business sale to

L'Oréal

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Puig also held talks with Kering on beauty business

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L'Oreal real interest was in the Gucci licence

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Start of talks pre-dated de Meo

By Mathieu Rosemain, Andres Gonzalez and Mimosa Spencer

PARIS, Oct 20 (Reuters) - Kering's new CEO Luca de Meo

didn't take long to make his mark.

While preliminary conversations between the Gucci owner and

L'Oreal over the sale of Kering's beauty

business had begun in the spring, before de Meo was appointed,

the pace picked up once the Italian took charge in September,

according to two people familiar with the matter.

There was another reason to speed up talks: Spanish-listed

beauty firm Puig had held discussions with Kering

about buying the business, one of the two people and a third

source said.

"Puig tried to be around in the last two months, but it was

a very different deal, with different structuration," one of the

sources said.

In the end, de Meo chose the deep pockets and simpler

structure of L'Oreal's offer, in a deal announced on Monday.

In an interview with the Financial Times on Monday, de Meo

said he moved to seal the beauty deal "as quickly as possible".

He promised there would be more deals and did not rule out the

sale of Kering's eyewear division.

Puig declined to comment. Kering did not comment beyond its

statement. L'Oreal did not respond to a request for comment.

CLOSE-KNIT FRENCH CORPORATE CIRCLES

Kering's exit from the beauty business marks a U-turn from

the strategy championed by de Meo's predecessor Francois-Henri

Pinault - whose family controls the luxury giant - to diversify

away from slowing top fashion brand Gucci.

Kering parts with Creed - the ultra-premium fragrance house

it acquired just two years ago for 3.5 billion euros ($4.08

billion) - while L'Oreal secures 50-year beauty licenses for key

brands like Bottega Veneta and Balenciaga and, most crucially,

for Gucci when an existing license with Coty ( COTY ) expires, most

likely in 2028.

The deal's genesis reveals the role of personal

relationships in a tightly-knit French corporate landscape.

François-Henri Pinault, who stepped down as Kering CEO but

remains chairman, and L'Oréal's leadership team - CEO Nicolas

Hieronimus and Chairman Jean-Paul Agon - have maintained close

ties through the Yves Saint Laurent beauty license, which

L'Oreal acquired in 2008.

"Pinault, Hieronimus and Agon have known each other well for

20 years thanks to the Saint Laurent agreement and are close

friends," said one of the sources.

"Top management spent a lot of time together over the last

month," the source said, adding that Hieronimus and de Meo hit

it off from the start.

TIMING DICTATED BY NEED TO RAISE CASH

The transaction's structure, and the timing of the deal,

show Kering had to compromise on price to raise cash and cut

uncomfortably high net debt, which at the end of June stood at

9.5 billion euros.

Meanwhile L'Oreal, the only beauty player that could quickly

table 4 billion euros, had set its eyes on the real trophy: the

ability to get hold of Gucci's licence.

"The reality is that Kering has an asset called Creed

that they overpaid for. L'Oréal didn't want it, which is part of

the bride's dowry," an industry source said. "L'Oréal's only

interest was the Gucci licence."

"For Luca de Meo, it's a good move, but for Kering and for

those who decided to make this strategic move, it's still a

withdrawal," the industry source said.

($1 = 0.8575 euros)