Melissa Juried Kriebel
Estee Lauder to acquire Tom Ford for $2.8 billion
Nov 16, 2022, 06:06 pm
3 min read
The American multinational cosmetics brand, Estee Lauder has agreed to buy designer Tom Ford’s company for a whopping $2.8 billion.
According to the deal, Tom Ford is going to retain his position as creative director until the end of next year.
The deal includes the Tom Ford beauty cosmetics and fragrance collection, with which Estee Lauder already has a licensing agreement until 2030.
Largest deal in the luxury industry this year
The $2.8 billion deal is the largest in the luxury industry this year.
This deal comes as high-end luxury brands are looking for new avenues for growth, as the business in China (once the engine for luxury beauty businesses) has become more difficult amid pandemic restrictions.
According to the estimates by Forbes, Tom Ford will become a billionaire post this transaction.
Unlocking new opportunities
Fabrizio Freda, president and CEO of Estee Lauder said in a statement, “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,” added Freda.
Long-term cash flow
Why ELC is buying Tom Ford
The Estee Lauder Companies (ELC) can take on rivals from the LVMH group with this acquisition.
The benefits of ELC include obtaining the long-term cash flow from owning Tom Ford beyond the current license expiration in 2030, new licensing revenue streams, the elimination of royalty payments on beauty, and other anticipated synergies.
These synergies include creative oversight and additional online penetration opportunities.
Who is Tom Ford?
Tom Ford is best known for turning Gucci into a brand worth billions of dollars, and at a time when Gucci was going through a rough patch.
He later gained many accolades for raising his own highly successful fashion and beauty brand, Tom Ford.
His brand houses mostly menswear, but also counts women’s apparel, handbags, cosmetics, and perfumes as part of its product line.
Estee Lauder is the second-largest cosmetics company in the world
For the uninitiated, Estee Lauder, the American multinational cosmetics brand, bearing the name of her founder is a manufacturer and marketer of makeup, skincare, fragrance, and hair care products, based in Midtown Manhattan, New York City.
This luxury brand is the second-largest cosmetics company in the world after L’Oréal.
Its more than 25 brands are sold in approximately 150 countries.
More about the deal
Estee Lauder is expected to pay $2.3 billion after Italian eyewear manufacturer Marcolin SpA which owns the license for Tom Ford eyewear pays $250 million.
Estee Lauder will finance the deal through a combination of cash, debt, and $300 million in deferred payments to sellers.
Ermenegildo Zegna Group and Marcolin will enter long-term license agreements for Tom Ford fashion and Tom Ford eyewear, respectively.
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