The Estee Lauder Companies (ELC) has said it is acquiring luxury powerhouse Tom Ford in a deal valued at $2.8 billion. It will mark the beauty company’s biggest acquisition yet. As part of the deal, Ermenegildo Zegna Group and Marcolin S.p.A. will enter long-term licence agreements for Tom Ford fashion and Tom Ford eyewear, respectively.
“The Estée Lauder Companies Inc announced today that it has signed an agreement to acquire the TOM FORD brand, a global leader in luxury. The transformational deal will establish its longstanding partner, The Estée Lauder Companies (“ELC”), as the sole owner of the TOM FORD brand and all its intellectual property,” Estée Lauder Companies said in a statement.
It added that though the deal values the total enterprise at $2.8 billion, the amount to be paid by ELC for the acquisition is about $2.3 billion, net of a $250 million payment to ELC at closing from Marcolin. ELC 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.
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 acquisition is subject to certain conditions, including regulatory approvals, and is expected to close in the first half of calendar 2023. ELC expects this transaction to be dilutive to adjusted diluted earnings per share 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, ELC said.
The purchase, subject to regulatory approvals, is slated to close in the first half of 2023. Under the agreement, Tom Ford, founder and CEO of Tom Ford International, will remain the brand’s creative visionary through the end of 2023. Domenico De Sole, chairman of Tom Ford International, will stay on as a consultant until that same time.
Estee Lauder introduced its Tom Ford Beauty line in 2006. In Estee Lauder’s fiscal year that ended June 30, the brand’s net sales grew nearly 25 per cent compared to the prior year. The beauty company said that in the next few years it expect the beauty line to bring in net sales of $1 billion.
Fabrizio Freda, president and chief executive officer of The Estée Lauder Companies, said, “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.”
Estee Lauder said it aims to finance the acquisition through a combination of cash, debt and $300 million in deferred payments to sellers that become due beginning in July of 2025.
Tom Ford, founder and CEO of Tom Ford International, said, “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.”
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