Estee Lauder to Buy Out Tom Ford in a Deal Valued at $2.8B
Edited by: TJVNews.com
The Estee Lauder Cos. is acquiring luxury powerhouse Tom Ford in a deal valued at $2.8 billion, marking the beauty firm’s biggest acquisition yet, as was reported by the AP.
As part of the deal announced Tuesday, Ermenegildo Zegna Group and Marcolin S.p.A. will enter long-term license agreements for Tom Ford fashion and Tom Ford eyewear, respectively.
The AP also reported that while Estee Lauder said the deal values the total enterprise at $2.8 billion, the New York-based beauty company is expected to pay roughly $2.3 billion, after a $250 million payment from Italian eyewear manufacturer Marcolin SpA.
The purchase, subject to regulatory approvals, is slated to close in the first half of 2023.
Under the agreement, Tom Ford, 61, founder and CEO of Tom Ford International, will remain the brand’s creative visionary through the end of 2023, the AP reported. Domenico De Sole, chairman of Tom Ford International, will stay on as a consultant until that same time.
Saying he “could not be happier,” Ford added of Estée Lauder in a statement, “They have been an extraordinary partner from the first day of my creation of the company and I am thrilled to see them become the luxury stewards in this next chapter of the Tom Ford brand,” as was reported by the New York Times.
Estee Lauder introduced its Tom Ford Beauty line in 2006. The AP also reported that in Estee Lauder’s fiscal year that ended June 30, the brand’s net sales grew nearly 25% compared to the prior year. The beauty company said that in the next few years it expect the beauty line to bring in net sales of $1 billion.
“This strategic acquisition will unlock new opportunities and fortify our growth plans for Tom Ford Beauty,” said Fabrizio Freda, president and CEO of Estee Lauder in a statement, as was reported by the AP. “It will also further help to propel our momentum in the promising category of luxury beauty for the long-term, while reaffirming our commitment to being the leading pure player in global prestige beauty.”
“We are incredibly proud of the success Tom Ford Beauty has achieved in luxury fragrance and makeup and its dedication to creating desirable, high-quality products for discerning consumers around the world,” Freda said, according to the NYT report. He added the deal will “also further help to propel our momentum in the promising category of luxury beauty for the long-term, while reaffirming our commitment to being the leading pure player in global prestige beauty.”
Estee Lauder said it aims to finance the acquisition through a combination of cash, debt and $300 million in deferred payments to sellers that become due beginning in July of 2025, the AP reported.
The NYT report indicated that the acquisition was driven by the strength of Tom Ford’s beauty business, which includes fragrance, cosmetics and skin care, and for which Estée Lauder has had a longstanding licensing agreement. The Tom Ford high-end scents, which include Black Orchid and Tuscan Leather, retail for more than $100 and routinely make the best-seller lists.
The deal also brings apparel to Estée Lauder, which had been strictly focused on beauty, with a portfolio of brands that include La Mer, Bobbi Brown and Clinique, as was reported by the NYT.
Perfumes have become a focus for Estée Lauder, particularly as the premium fragrance industry saw an unexpected bump during the pandemic, with shoppers seeking out small luxuries, the NYT reported. Estée Lauder’s recent perfume acquisitions include the brands Frédéric Malle, Kilian and Le Labo. While hundreds of fragrances are released every year, a hit such as Chanel No. 5 or Mugler’s Angel can be the engine of a brand’s finances, thanks to the high profit margins associated with scent, whose appeal is not season specific, the NYT said.
“One of the surprise categories of growth for us during the pandemic was fragrance,” Tracey Thomas Travis, Estée Lauder’s chief financial officer, told analysts in June, according to the NYT report. “It represented a self-pampering opportunity for people.” Shoppers became more willing to buy fragrance online, Ms. Travis said, and such sales growth has continued even as life in North America and Western Europe has returned more to normal.
