The Estée Lauder Companies acquires Tom Ford for US$2.8B

16 Nov 2022 --- For a total of US$2.8 billion, beauty giant The Estée Lauder Companies (ELC) has acquired the Tom Ford brand for furthering opportunities to internationally expand luxury and digital growth. The deal is expected to close in the first half of calendar 2023, subject to contingencies such as regulatory approvals.

“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,” shares Fabrizio Freda, president and CEO at ELC.

The amount to be paid by ELC for the acquisition is approximately US$2.3 billion, with a net of US$250 million payment from Marcolin to ELC at closing.

ELC’s benefits include securing the long-term cash flow from owning the fast-growing Tom Ford Beauty brand beyond the existing license expiration in 2030 and the elimination of royalty payments on beauty upon closing.

Moreover, it provides ELC new licensing revenue streams and other anticipated synergies including 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 in fiscal 2023 by (US$0.05) to (US$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 ELC’s acquisition of Tom Ford, its current licensing partners, including Marcolin for eyewear and Ermenegildo Zegna for fashion are also included.

Tom Ford Beauty
First introduced by ELC in 2006, Tom Ford Beauty has expanded beyond its initial fragrance line to include a makeup and skincare collection. Through this acquisition, the company aims to expand the line to critical markets for luxury and online channels globally.

In ELC’s fiscal year ended June 30, 2022, Tom Ford Beauty achieved nearly 25% net sales growth compared to the prior year. Over the next couple of years, ELC expects the brand to achieve annual net sales of one billion dollars.

“The brand continues to have strong momentum across channels and key markets, resulting in a prestige fragrance ranking in the top 15 in the US and top ten in China,” ELC states.

Preserving legacy
Marcolin further announced that it is entering a long-term license with ELC for Tom Ford eyewear. This perpetual license agreement provides for an upfront payment by Marcolin, funded by a combination of cash and capital increase of US$50 million by the company’s shareholders. 

“This represents a substantial extension of Marcolin’s current license with Tom Ford,” says Marcolin.

Additionally, as part of the deal, Ermenegildo Zegna will acquire Tom Ford’s fashion business operations. “ELC and Zegna will align closely on the creative direction to continue building on the luxury positioning of the Tom Ford brand,” the company states.

Tom Ford, founder and CEO of the global luxury brand, will continue to serve as the brand’s creative visionary. At the same time, Domenico De Sole, chairman of Tom Ford International, will continue as a consultant after the deal closes and through the end of the calendar 2023.

Ford thinks ELC is the “ideal home” for the brand. He says: “Ermenegildo Zegna and Marcolin have been spectacular long-standing partners as well, and I am happy to see the preservation of the great relationship we have built over the past 16 years.”

Edited by Radhika Sikaria