Gucci Owner Kering in Advanced Talks to Acquire Tom Ford
French company has been competing for closely held Tom Ford with rivals including Estée Lauder
French luxury giant Kering SA KER -0.61% is in advanced discussions to buy fashion brand Tom Ford, according to people familiar with the matter.
Kering has been competing for closely held Tom Ford with rivals including Estée Lauder EL 2.01% Cos., but the French company appears to be the front-runner now and a deal could be reached soon, according to the people.
There are no guarantees of an agreement, the people cautioned, and another party could still prevail.
The Wall Street Journal reported in August that Estée Lauder was in talks to acquire Tom Ford, in a deal that could have been worth $3 billion or more and could represent the cosmetics giant’s largest-ever acquisition. It is possible the price has come down though, given the perilous market environment underscored by Estée Lauder’s underwhelming results and forecast issued on Wednesday.
Kering, whose brands include Gucci, Saint Laurent and Balenciaga, has ridden somewhat of a postpandemic boom thanks to its well-heeled customer base. Those shoppers have been more resilient amid inflationary pressures and continue splurging on pricey handbags, watches and clothing.
Last month, Kering posted a higher-than-expected rise in sales, boosted in part by U.S. tourists spending freely in Paris and other European capitals. The company has a market value of nearly €60 billion (about the same in U.S. dollars), so Tom Ford wouldn’t represent an overly large bite.
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.
The Journal had previously reported that Estée Lauder was especially interested in Tom Ford’s beauty business, with which it has a longstanding licensing deal. But a deal with Kering could make more strategic sense given its expertise in high-end fashion and accessories.
Tom Ford could use help growing its women’s accessories business, one of the people said.
Other luxury-fashion giants have also shown resiliency despite global economic uncertainty. Also last month, Hermès International SCA, the French maker of $10,000 handbags, said it expects to increase its prices by around 5% to 10% after reporting sales that easily topped analyst estimates.
And LVMH Moët Hennessy Louis Vuitton SE posted third-quarter revenue of €19.76 billion, beating expectations. The fashion conglomerate said it was confident in the continuation of its current sales growth, despite what it described as an uncertain geopolitical and economic backdrop.
This week Estée Lauder reported 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, with brands from Clinique to M.A.C., also lowered its outlook for the current fiscal year.