Estée Lauder Companies To Acquire Tom Ford Brand in $2.3 Billion Deal

After weeks of speculation, The Estée Lauder Companies Inc. has signed an agreement to acquire the Tom Ford brand. The transformational deal will establish its longstanding partner in beauty as the sole owner of the brand and all its intellectual property. Under the stewardship of ELC, the purchase of the Tom Ford brand and the extension of its current licensing partners will allow for continuity and the further evolution of the brand. The deal values the total enterprise at $2.8 billion. The amount to be paid by ELC for the acquisition is approximately $2.3 billion, net of a $250 million payment to ELC at closing from Marcolin S.p.A, which is related to the brand’s operations outside beauty.

ELC said 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. ELC’s benefits include securing the long-term cash flow from owning the fast-growing Tom Ford Beauty brand beyond the existing license expiration in 2030 and the elimination of royalty payments on beauty upon closing, as well as new licensing revenue streams and other anticipated synergies. These synergies include creative oversight, increased speed and agility, and opportunities for further online penetration, said ELC. The acquisition is subject to certain conditions, including regulatory approvals, and is expected to close in the first half of calendar 2023. Under the agreement, Ford 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. “I could not be happier with this acquisition as The Estée Lauder Companies is the ideal home for the brand,” Ford said 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.

Brand History

Ford created the Tom Ford brand in 2005; that same year, it aligned with Marcolin Group to produce and distribute optical frames and sunglasses and it signed a partnership with Estée Lauder to create a beauty brand. Lauder’s first Tom Ford fragrance, Black Orchid, bowed in 2006. Today, Tom Ford Beauty has become one of the most successful and aspirational beauty brands in the world. “We are incredibly proud of the success Tom Ford Beaty has achieved in luxury fragrance and makeup and its dedication to creating desirable, high-quality products for discerning consumers around the world,” said Fabrizio Freda, president and CEO, The Estée Lauder Companies. “As an owned brand, this strategic acquisition will unlock new opportunities and fortify our growth plans for Tom Ford Beauty. 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 honored that Tom Ford has been part of our ELC family for more than fifteen years, from our first collaboration with the Estée Lauder brand to the launch of Tom Ford Beauty and through its most recent successes,” said William P. Lauder, executive chairman, The Estée Lauder Companies. “ELC and Tom Ford share a deep appreciation for luxury, creativity, entrepreneurial spirit, and a commitment to excellence, and above all, the extraordinary talent that fuels our businesses.” Tom Ford is strongly positioned in the luxury fragrance and makeup categories, areas that are expected to outperform industry growth over the coming years. The acquisition supports the next level of growth for the brand in key markets for luxury and online channels globally, according to ELC.

Financials

According to ELC, Tom Ford Beauty has delivered impressive success, including growing strong double-digit net sales on a compound annual basis from fiscal years 2012 through 2022. In fiscal year ended June 30, 2022, Tom Ford Beaty achieved nearly 25% net sales growth as compared to the prior year, and over the next couple of years, it will achieve annual net sales of $1 billion dollars, according to ELC. Officials say the brand, which has more than 20 awards from The Fragrance Foundation, continues to have strong momentum across channels and key markets resulting in a prestige fragrance ranking in the top 15 in the United States and top 10 in China. Guillaume Jesel, president, Luxury Business Development, The Estée Lauder Companies, called Ford  “a true visionary and the ultimate architect of luxury.” “Together with the legendary Domenico De Sole, they have created a remarkable new world of luxury. It is an honor to continue to lead the brand and the exceptionally talented team, and manifest Tom Ford’s extraordinary vision of luxury beauty and beyond,” said Jesel.

Fashion & Eyewear

The deal with ELC will extend and expand the Tom Ford brand’s longstanding relationship with Ermenegildo Zegna N.V. 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 extended. “We have been partners and shareholders of the Tom Ford fashion business since its inception. This transaction is the first since our listing in December 2021, and confirms our commitment to leverage our platform to create value for all of our stakeholders,” said Ermenegildo Zegna, CEO of Ermenegildo Zegna Group. “We have been so inspired by the incredible talent at Tom Ford and are delighted to embark on this powerful and enriching relationship with The Estée Lauder Companies.” “It has been an incredible journey over the last two decades to establish the Tom Ford eyewear business among the global leaders of unparalleled quality and style. We are thrilled to work with The Estée Lauder Companies with our exclusive and perpetual license for the brand, which will allow us to further support the growth of this amazing brand,” said Fabrizio Curci, CEO of Marcolin S.p.A.