Estèe Lauder beats Kering and acquires Tom Ford

UPDATE 16/11/2022: After rumors of the deal closing, things are now official. Estèe Lauder has bought Tom Ford's empire for about $2.3 billion (the WSJ reporting the news does not clarify why the amount paid by Estèe Lauder is lower than the deal's valuation, which was $2.8 billion), net of a $250 million payment to Lauder at closing by Marcolin SpA, Tom Ford's eyewear licensee. The beauty giant will finance the transaction through a combination of cash, debt and $300 million in deferred payments to the sellers, maturing in July 2025. Fabrizio Freda, CEO of Estèe Lauder, gave all the attention to Tom Ford Beauty in his statement, apparently without mentioning apparel: «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». During a conference at Deutsche Bank, however, the group's CFO called Tom Ford Beauty and Jo Malone « two of our largest midsized brands that are knocking on the door of being over that $1 billion threshold to be large brands over the next couple of years». But what will be of Ford's fashion business?

According to the brand's statement, Tom Ford will remain at the creative helm of the brand until the close of calendar 2023 - hinting that the 61-year-old designer may retire from the catwalks after that date. In the meantime, Estèe Lauder has taken over all of Ford's licenses for the production of the brand's collections, confirming the one with Marcolin SpA and further extending the Zegna Group's production and distribution license, which will now handle the entire Tom Ford production chain, from underwear to women's and men's collections to accessories and jewelry. Zegna's licensing agreement with Estée Lauder will last for 20 years and will be renewed for another 10 years if certain minimum performance conditions being met. As part of this transaction, Zegna will acquire Tom Ford's fashion business necessary to fulfill its obligations as a licensee. The transaction, which Zegna will finance with its own cash and cash equivalents, is expected to increase the Zegna Group's earnings within the first full year following the closing of the transaction.

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A few hours ago a source confirmed to WSJ that Estèe Lauder has won the battle to take over Tom Ford, beating rival Kering with a $2.8 billion bid. According to the newspaper, unless there are any last-minute hiccups, the acquisition could be confirmed as early as today. The offer, which is slightly lower than the original $3 billion for which Tom Ford's empire was valued, is said to be due to market volatility and fears about upcoming turmoil in the economy. In recent weeks, it appeared that Kering was expected to win, given the positive financial results posted in the last quarter-while Estèe Lauder itself had suffered a 5 percent drop in sales in the last quarter due to lockdowns in China and a slowdown in orders from U.S. sellers.

Despite these underwhelming results, however, Estèe Lauder is fresh off a remarkable acquisition campaign that has seen it enrich its portfolio of beauty brands large and small in recent years. Of course, Tom Ford's would be the most valuable beauty brand, the one positioned highest in the group's portfolio and the one allowing for the most significant expansion. The group would also obtain Tom Ford's licenses to produce eyewear and the Ford-designed collections - the very latter category would allow the American group to plant the proverbial flag in the fashion field and compete more closely with French groups such as Kering and LVMH, which, by the way, are reinforcing their own beauty offerings.