Cosmetics company Estee Lauder has agreed to buy luxury brand Tom Ford for about $2.8 billion, including debt, marking its biggest acquisition to date.
Estee Lauder will pay $2.3 billion in cash and debt for the luxury brand, founded by fashion designer Tom Ford, the company said in a statement on Tuesday.
This is in addition to $300 million in deferred payments that will be paid out from July 2025. The deal values the company at $2.8 billion, including $250 million Estee Lauder will receive from Marcolin, the Italian eyewear brand that holds the licence for Tom Ford's line of glasses.
The acquisition is subject to conditions, including regulatory approvals, and is expected to close in the first half of 2023.
Estee Lauder already had a licensing agreement for Tom Ford’s beauty and fragrance products. It said the benefits of the deal included securing the long-term cash flow from owning the fast-growing Tom Ford Beauty brand beyond the existing licence 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,” the company said.
Under the agreement, Tom Ford, the founder and chief executive of Tom Ford International, will continue to serve as the brand’s “creative visionary” after the deal closes and through the end of 2023. Domenico De Sole, chairman of Tom Ford International, will stay on as a consultant until that same time.
The acquisition is Estee Lauder’s biggest and latest in a series of transactions, including taking full control of Canadian beauty group Deciem for about $1 billion in 2021.
The deal is also one of the biggest in the luxury fashion and cosmetics industry.
In 2018, Capri Holdings bought Italian luxury fashion brand Versace for $2.12 billion. In 2020, VF Corporation — which owns the Vans, Timberland, Altra and The North Face brands — bought streetwear company Supreme for $2.1 billion.
Tom Ford is known for its menswear, but also counts women’s apparel, handbags, cosmetics and perfumes as part of its product line.
US luxury and beauty products companies like Ralph Lauren and Estee Lauder have shrugged off the impact of inflation as wealthier shoppers continue to spend lavishly on high-end clothing and footwear.
“The deal will extend and expand the Tom Ford brand’s longstanding relationship with Ermenegildo Zegna to include a long-term licence for all men’s and women’s fashion as well as accessories and underwear,” the company said.
Zegna held a 15 per cent stake in the Tom Ford brand before the latest agreement.
As part of the deal, Zegna will acquire operations of the Tom Ford fashion business necessary to perform its obligations as licensee.
Estee Lauder and Zegna “will align closely on the creative direction to continue building on the luxury positioning of the Tom Ford brand”, the company said.
“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,” said Fabrizio Freda, president and chief executive of Estee Lauder.
Estee Lauder said Tom Ford Beauty was strongly positioned in the luxury fragrance and make-up categories, areas that are expected to outperform industry growth over the coming years. It said the deal would help to boost the growth of the brand in key markets and online globally.
“I could not be happier with this acquisition, as The Estee Lauder Companies is the ideal home for the brand,” said Tom Ford.
“They have been an extraordinary partner from the first day of my creation of the company. Ermenegildo Zegna and Marcolin have been spectacular longstanding 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.”
Mr Ford, 61, who is from Austin, Texas, was creative director of Gucci. With the backing of Bahrain alternative asset manager Investcorp, he reinvented the Florentine luxury brand before going under his own name in 2005.
His company started off by making men’s clothing and grew to sell eyewear, beauty and fragrances licensed to Estee Lauder, as well as other accessories such as watches and leather goods.
Perella Weinberg Partners served as financial adviser to Estee Lauder. Paul, Weiss, Rifkind, Wharton & Garrison served as legal counsel. Goldman Sachs served as sole financial adviser to Tom Ford. Skadden, Arps, Slate, Meagher & Flom served as legal counsel. Zegna received financial advice from UBS. Latham & Watkins served as legal counsel to Marcolin.