Investing.com -- Shares of Estée Lauder Companies (NYSE; EL) fell over 2% in premarket trading after Bloomberg reported that the company is advancing in talks over a potential business combination with Puig Brands SA.

Estée Lauder and Puig confirmed on March 23 that they were in discussions about a merger of their businesses but did not disclose terms.

The companies are negotiating a deal that would consist mostly of stock and could be formally announced within weeks, Bloomberg reported, citing people familiar with the matter.

As part of the discussions, Puig Executive Chairman Marc Puig would join the board and is expected to play a role in integrating the two companies. His presence is seen as providing continuity. He stepped down as chief executive officer last month.

The talks have not resulted in a final agreement and could still fall apart or be delayed, according to the report.

A combination would reshape competition in the luxury beauty sector, creating a larger challenger to L’Oréal. Estée Lauder is currently second globally in cosmetics, and a deal with Puig would strengthen its position in fragrances.

Puig, listed in Madrid, has a market value of 9.8 billion euros, while New York-listed Estée Lauder has a market value of about $27 billion.

Since the talks were confirmed last month, Estée Lauder shares have lost around 15% of their value, while Puig shares have gained 11%.

The potential transaction comes as consumer and retail companies explore mergers amid risks related to supply chains, geopolitics, inflationary pressures and shifting consumer habits.

Estée Lauder is undergoing a turnaround under Chief Executive Officer Stéphane de La Faverie, including a shift toward online retail channels such as Amazon.com.

Puig has also made organisational changes, with Marc Puig moving from the chief executive role to focus on mergers and acquisitions.