Estée Lauder to acquire Tom Ford in $2.8bn deal

The Estée Lauder Companies (ELC) has announced it is set to acquire luxury brand Tom Ford in a deal that values the company at $2.8bn (£2.35bn).

The deal will establish its longstanding partner as the sole owner of the Tom Ford brand and all its intellectual property.

Under the stewardship of ELC, it said 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 as one of the “preeminent global luxury brands of the 21st Century”.

The amount to be paid by ELC for the acquisition is approximately $2.3bn (£1.93bn), net of a $250m (£210.5m) payment to ELC at closing from Marcolin S.p.A.

ELC added it expects to fund this transaction through a combination of cash, debt and $300m (£252m) in deferred payments to the sellers that become due beginning in July 2025.

ELC said the deal’s benefits include 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.

ELC expects this transaction to be dilutive to adjusted diluted earnings per share (“EPS”) 1 in fiscal 2023 by ($0.05) to ($0.15), primarily from one time acquisition-related costs. For fiscal 2024, the transaction is anticipated to be roughly neutral to adjusted diluted EPS.

Under 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 also extend and expand the brand’s long-standing relationship with Ermenegildo Zegna N.V. (Zegna Group) to include a long-term licence 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 licence with Marcolin, the global eyewear manufacturer, will also be substantially extended.

Fabrizio Freda, president and CEO, The Estée Lauder Companies, said: “We are incredibly proud of the success Tom Ford Beauty has achieved in luxury fragrance and makeup and its dedication to creating desirable, high-quality products for discerning consumers around the world.

“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.”

Tom Ford added: “I could not be happier with this acquisition as The Estée Lauder Companies is the ideal home for the brand. 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.

“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.”