Estée Lauder Companies Nabs Tom Ford Brand in $2.8 Billion Deal

After months of speculation, the Estée Lauder Companies Inc. (ELC) announced on Tuesday that it has inked a deal to acquire the Tom Ford brand for $2.3 billion.

In a deal that values the Tom Ford brand at $2.8 billion, ELC outbid rival Kering, which was reported earlier this month to be a frontrunner for the company.

According to ELC, it expects to fund this transaction through a combination of cash, debt and $300 million in deferred payments to the sellers that become due beginning in July 2025.

This deal will establish ELC as the sole owner of the Tom Ford brand and all its intellectual property.

Under the terms of the agreement, Tom Ford, founder and CEO of Tom Ford International, will continue to serve as the brand’s creative visionary after closing and through the end of calendar 2023. Domenico De Sole, chairman of Tom Ford International, will stay on as a consultant until that same time.

The deal will extend and expand the Tom Ford brand’s longstanding relationship with Ermenegildo Zegna to include a long-term license for all men’s and women’s fashion as well as accessories and underwear. As part of this transaction, Zegna will acquire operations of the Tom Ford fashion business necessary to perform its obligations as licensee. ELC and Zegna will align closely on the creative direction to continue building on the luxury positioning of the Tom Ford brand.

The brand’s current license with Marcolin, a global eyewear manufacturer, will also be substantially extended.

In a statement on Tuesday, Mr. Ford said that he “could not be happier” with this acquisition stating that The Estée Lauder Companies is the “ideal home” for the brand.

“They [ELC] 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,” said Ford. “Ermenegildo Zegna and Marcolin have been spectacular long-standing partners as well and I am happy to see the preservation of the great relationship that we have built over the past 16 years. With their full commitment, I trust they will continue the brand’s future as a luxury company that strives to produce only the highest quality fashion and eyewear.”

Estée Lauder Companies Inc. first started its working relationship with Tom Ford in 2006 as the license holder to the brand’s Tom Ford Beauty line of fragrance, makeup, and skin care. According to ELC, this strategic acquisition supports the next level of growth for Tom Ford Beauty in key markets for luxury and online channels globally.

The beauty line has delivered “impressive success,” ELC said, including growing strong double-digit net sales on a compound annual basis from fiscal years 2012 through 2022. In ELC’s fiscal year 2022, Tom Ford Beauty achieved nearly 25% net sales growth as compared to the prior year, and over the next couple of years, it is expect that the brand will achieve annual net sales of $1 billion.

“As an owned brand, this strategic acquisition will unlock new opportunities and fortify our growth plans for Tom Ford Beauty,” Fabrizio Freda, president and CEO of The Estée Lauder Companies said in a statement. “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.”

The acquisition is Lauder’s biggest to date, following the company’s agreement to pay $2.2 billion for a majority position in Deciem in 2021. This deal also marks the company’s first foray into fashion.

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