Cosmetics giant Estee Lauder Companies Inc is nearing a deal to buy US luxury fashion brand Tom Ford for about $2.8 billion, including debt, the Financial Times reported on Friday (Nov. 11), citing people familiar with the matter.
Tom Ford, founded by the former longtime creative director for Italy’s Gucci, entered into exclusive negotiations with Estée Lauder this week and a deal could be announced as early as Monday (Nov. 12), according to the FT report.
The deal would be the largest acquisition ever by Estée Lauder whose shares closed up 4.26% on Friday (Nov. 10).
closed up 4.26% on Friday 11/11/2022)
Major merger news came out in August via the Wall Street Journal, after the New York-based publication reported that Estée Lauder is in talks to buy the fashion brand, in what could be a $3 billion deal.
Earlier, in July, Bloomberg reported that Tom Ford hired Goldman Sachs to explore a potential sale.
Last week, the WSJ reported that French luxury group Kering, the owner of Gucci, was also in advanced discussions to buy the fashion brand, however, it appears that The Estée Lauder Companies has beat them out.
Estée Lauder would be a newcomer to haute couture, but the beauty company has had a licensing deal with Ford since 2005, which led to the development of cosmetics and fragrances under the Tom Ford Beauty brand.
Estée Lauder currently owns its namesake beauty brand, along with a slew of other prestige brands, including Clinique, La Mer, Mac, Smashbox and Too Faced, and describes itself to investors as “the only major company focused solely on prestige beauty.”
Tom Ford is known for its menswear, but also produces womenswear and leathergoods in addition to fragrance and other beauty items. The Texas-born designer revitalised Gucci in the late 1990s
Investcorp bought about 50% Gucci in 1988 and 1989. The Bahrain-based alternative asset manager then bought the remaining 50% in the Florentine company from Maurizio Gucci, grandson of the founder Guccio Gucci, in 1993. With the backing of Investcorp, Tom Ford, reinvented the Italian brand before setting up his own label in 2005.
A deal between Estee Lauder and Tom Ford “would highlight the strength of a luxury fashion and cosmetics market that has continued to be resilient in the face of rising inflation and supply chain disruptions” the FT wrote, as wealthier shoppers continue to splurge on high-end clothing and cosmetics.
UPDATE 15/11/2022
The Estée Lauder Companies Inc. announced on Tuesday (Nov. 15) that it has signed an agreement to acquire the TOM FORD brand. The agreement values the American fashion and beauty label at $2.8 billion and will be paid through a combination of cash, debt, and deferred payments that will be due in 2025. The deal is expected to close in the first half of next year, pending regulatory approvals. 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.
“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, Tom Ford – the celebrated designer, founder, and CEO of his eponymous label, stated.
