Estée Lauder to Buy Tom Ford in $2.8 Billion Deal
U.S. cosmetics company, prevailing over big luxury names including Kering, will spend roughly $2.3 billion after payments
Estée Lauder Cos. will acquire Tom Ford in a deal valued at roughly $2.8 billion, building on a longstanding licensing agreement and marking the cosmetics giant’s largest-ever acquisition, executives said Tuesday.
Estée Lauder prevailed in an auction for the high-end fashion label that drew competition from big names in luxury including Kering SA . The French company was poised to win the auction earlier this month, The Wall Street Journal reported.
Estée Lauder is expected to pay roughly $2.3 billion, net of a $250 million payment from Italian eyewear manufacturer Marcolin SpA, which has its own licensing deal with Tom Ford. It plans to fund the transaction through a combination of cash, debt and $300 million in deferred payments to sellers that become due beginning in July 2025.
The acquisition, still subject to regulatory approvals, is expected to close in the first half of 2023.
The Journal reported on Monday that an agreement between the two parties was imminent. The Financial Times reported on Friday that Estée Lauder was set to clinch a deal for closely held Tom Ford.
In August, the Journal reported that Estée Lauder, which sells brands including Clinique and M.A.C., was talking to Tom Ford about a deal that could have been worth at least $3 billion. Volatility in markets and fears of a softening economy appear to have dented the price tag somewhat.
Tom Ford is best-known for its menswear, though it also sells womenswear and accessories as well as a fast-growing, high-end line of cosmetics and fragrances. Tom Ford’s beauty business is considered a so-called ultraprestige brand.
In the fiscal year ended June 30, Tom Ford’s beauty business had net sales growth of roughly 25% and is on pace to reach $1 billion annually in the coming years.
Estée Lauder has been especially interested in that business, with which it has maintained a licensing deal since 2006. It is less-versed in apparel, but the takeover will allow the company to venture into new categories and compete more closely with fashion houses such as LVMH Moët Hennessy Louis Vuitton SE.
Estée Lauder also said Tuesday it has struck fresh licensing agreements for Tom Ford’s fashion and eyewear, confirming earlier reporting from the Journal.
It will extend the licensing agreement with Marcolin and has also given a long-term license for all of Tom Ford’s men’s and women’s fashion, plus accessories and underwear, to Italian luxury fashion house Ermenegildo Zegna NV, an existing Tom Ford partner.
Estée Lauder earlier this month said its organic sales dropped 5% in the latest quarter, hurt by Covid-19 lockdowns in China and a slowdown in orders from U.S. retailers. The New York beauty company also lowered its outlook for the current fiscal year.
It has been an active acquirer over the years, however its deals have been relatively small. Estée Lauder paid around $1 billion each to buy the rest of Canadian beauty company Deciem Inc. in 2021 and the Korean skin-care company Have & Be Co. in 2019. A few years before, it paid around $1.5 billion for Too Faced Cosmetics LLC.
France’s Kering, whose brands include Gucci, Saint Laurent and Balenciaga, last month posted a higher-than-expected rise in sales, boosted in part by U.S. tourists spending freely in Paris and other European capitals.
Mr. Ford, a Texas native, founded his eponymous brand after a long stint as creative director at Gucci. A young Mr. Ford was depicted in the 2021 film “House of Gucci,” which chronicled the history of the Gucci family and brand.
Mr. Ford is expected to continue to serve as his brand’s creative visionary through the end of 2023.